Improving Competitiveness and Increasing Economic

+ INNOVATION & ENTREPRENEURSHIP IMPROVING COMPETITIVENESS AND INCREASING ECONOMIC GROWTH IN TANZANIA IMPROVING COMPETITIVENESS AND INCREASING ECONOMIC GROWTH The Role of Information and IN TANZANIA Communication Technologies

Information for Development Program www.infoDev.org www.infoDev.org IMPROVING IMPROVING COMPETITIVENESS COMPETITIVENESS AND INCREASING AND INCREASING ECONOMIC GROWTH ECONOMIC GROWTH The Role of Information and The Role of Information and IN TANZANIA Communication Technologies IN TANZANIA Communication Technologies

AN infoDev PUBLICATION PREPARED BY AN infoDev PUBLICATION PREPARED BY

OTF Group OTF Group

Information for Information for Development Program Development Program www.infoDev.org www.infoDev.org

ootftf ttanzaniaanzania ffront.inddront.indd i 22/20/07/20/07 6:58:256:58:25 PMPM ootftf ttanzaniaanzania front.inddfront.indd i 22/20/07/20/07 66:58:25:58:25 PPMM To cite this publication: To cite this publication: OTF Group. 2005. Improving Competitiveness and Increasing Economic Growth in Tanzania: The Role of OTF Group. 2005. Improving Competitiveness and Increasing Economic Growth in Tanzania: The Role of Information and Communication Technologies. Washington, DC: infoDev / World Bank. Available at: http:// Information and Communication Technologies. Washington, DC: infoDev / World Bank. Available at: http:// www.infodev.org/en/Publication.81.html www.infodev.org/en/Publication.81.html

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1. EXECUTIVE SUMMARY 1 1. EXECUTIVE SUMMARY 1

2. TANZANIA TODAY 9 2. TANZANIA TODAY 9 2.1. A Starting Point 9 2.1. A Starting Point 9 2.2. GDP Analysis 9 2.2. GDP Analysis 9 2.3. Sector Economic Performance and Trade Statistics 10 2.3. Sector Economic Performance and Trade Statistics 10 2.3.1. Methodology and Theory 12 2.3.1. Methodology and Theory 12 2.3.2. Broad Economic Performance and Trade Statistics 13 2.3.2. Broad Economic Performance and Trade Statistics 13 2.3.3. Regional Trade Statistics 13 2.3.3. Regional Trade Statistics 13

3. TANZANIA’S TRANSITION TO ECONOMIC GROWTH 3. TANZANIA’S TRANSITION TO ECONOMIC GROWTH AND A COMPETITIVE ECONOMY 19 AND A COMPETITIVE ECONOMY 19 3.1. Prosperity: Governments Enable It; Firms Create It 20 3.1. Prosperity: Governments Enable It; Firms Create It 20 3.2. The Evolution from Basic o Complex Products 20 3.2. The Evolution from Basic o Complex Products 20 3.2.1. The Role of SMEs 22 3.2.1. The Role of SMEs 22 3.2.2. Competitiveness and Poverty Alleviation 22 3.2.2. Competitiveness and Poverty Alleviation 22 3.3. Creating a Competitiveness Mindset 23 3.3. Creating a Competitiveness Mindset 23

4. ICT AND BUILDING COMPETITIVENESS 27 4. ICT AND BUILDING COMPETITIVENESS 27 4.1 Access, Ability and Benefit Model 27 4.1 Access, Ability and Benefit Model 27 4.2 Access: Mixed Results 29 4.2 Access: Mixed Results 29 4.2.1. Limited Access to Telecom and Internet Services 29 4.2.1. Limited Access to Telecom and Internet Services 29 4.2.2. Infrastructure Constraints 32 4.2.2. Infrastructure Constraints 32 4.2.3. The Urban/Rural Digital Divide 34 4.2.3. The Urban/Rural Digital Divide 34 4.3. Low Level of Ability 36 4.3. Low Level of Ability 36 4.3.1. Basic Educational Deficiencies 36 4.3.1. Basic Educational Deficiencies 36 4.3.2. Incorporating ICT into the Education System 37 4.3.2. Incorporating ICT into the Education System 37 4.3.3. Tertiary Enrollment 37 4.3.3. Tertiary Enrollment 37 4.3.4. Training: Not Yet Driven By Private Sector Needs 38 4.3.4. Training: Not Yet Driven By Private Sector Needs 38

Table of Contents . iii Table of Contents . iii

ootftf ttanzaniaanzania ffront.inddront.indd iiiiii 22/20/07/20/07 6:58:286:58:28 PMPM ootftf ttanzaniaanzania front.inddfront.indd iiiiii 22/20/07/20/07 66:58:28:58:28 PPMM 5. MIGRATING TO MORE SOPHISTICATED 5. MIGRATING TO MORE SOPHISTICATED PRODUCTS AND SERVICES 41 PRODUCTS AND SERVICES 41 5.1. Two Paths: Key Sectors and SMEs 41 5.1. Two Paths: Key Sectors and SMEs 41 5.2. Agribusiness 42 5.2. Agribusiness 42 5.2.1. Coffee 43 5.2.1. Coffee 43 5.2.2. Cashews 44 5.2.2. Cashews 44 5.2.3. Targeted ICT Interventions 45 5.2.3. Targeted ICT Interventions 45 5.3. Minerals and Mining 47 5.3. Minerals and Mining 47 5.3.1. Gemstone Industry Outlook 48 5.3.1. Gemstone Industry Outlook 48 5.3.2. Gemstone Lapidary 49 5.3.2. Gemstone Lapidary 49 5.3.3. Targeted ICT Interventions 50 5.3.3. Targeted ICT Interventions 50 5.4. Services 51 5.4. Services 51 5.4.1. Tourism 51 5.4.1. Tourism 51 5.4.2. ICT in Banking and e-Commerce 57 5.4.2. ICT in Banking and e-Commerce 57 5.4.3. Future Development of Services Sector: 5.4.3. Future Development of Services Sector: Business Process Outsourcing 58 Business Process Outsourcing 58 5.5. Building Competitive SMEs 59 5.5. Building Competitive SMEs 59 5.5.1. Lack of SME Adoption 59 5.5.1. Lack of SME Adoption 59 5.5.2. Potential for SMEs to Build Competitive Advantage 5.5.2. Potential for SMEs to Build Competitive Advantage Through ICT 60 Through ICT 60 5.6. Strengthening the Private Sector 62 5.6. Strengthening the Private Sector 62 5.6.1. Incubation 62 5.6.1. Incubation 62 5.6.2. Business Development Services 62 5.6.2. Business Development Services 62 5.6.3. An ICT Alliance 62 5.6.3. An ICT Alliance 62

6. THE ROLE OF GOVERNMENT: BUILDING AND CAPITALIZING 6. THE ROLE OF GOVERNMENT: BUILDING AND CAPITALIZING ON MOMENTUM 71 ON MOMENTUM 71 6.1. National ICT Policy 71 6.1. National ICT Policy 71 6.2. Regulatory Regime Reform 72 6.2. Regulatory Regime Reform 72 6.3. E-government 74 6.3. E-government 74

7. CONCLUSION 79 7. CONCLUSION 79

iv . Improving Competitiveness and Increasing Economic Growth in Tanzania iv . Improving Competitiveness and Increasing Economic Growth in Tanzania

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9. APPENDICES 91 9. APPENDICES 91 9.1. Economic and Trade Statistics 91 9.1. Economic and Trade Statistics 91 9.2. ICT Assessment-2003 ITU Indicators 97 9.2. ICT Assessment-2003 ITU Indicators 97

10. BIBLIOGRAPHY 103 10. BIBLIOGRAPHY 103

BOXES BOXES Box 1. The University Computing Centre Ltd.: “One Student, Box 1. The University Computing Centre Ltd.: “One Student, One Computer” 38 One Computer” 38 Box 2. AKSCG–KILICAFE 44 Box 2. AKSCG–KILICAFE 44 Box 3. Olam International 45 Box 3. Olam International 45 Box 4. Embedding Technology in a Coffee Bean 46 Box 4. Embedding Technology in a Coffee Bean 46 Box 5. The Gemological & Jewelry Vocational Training Centre 49 Box 5. The Gemological & Jewelry Vocational Training Centre 49 Box 6. Ebene Cyber City–Mauritius 59 Box 6. Ebene Cyber City–Mauritius 59 Box 7. Tanzania Development Gateway (TDG) SME Website Pilot Project 62 Box 7. Tanzania Development Gateway (TDG) SME Website Pilot Project 62 Box 8. Improving Logistics & Making Distance Irrelevant: Box 8. Improving Logistics & Making Distance Irrelevant: Issam International Ltd. 63 Issam International Ltd. 63 Box 9. The Parliamentary On-Line Information System 75 Box 9. The Parliamentary On-Line Information System 75 Box 10. GOT Increases Efficiencies in Human Resource Management 75 Box 10. GOT Increases Efficiencies in Human Resource Management 75

FIGURES FIGURES Figure 1. GDP per Capita 10 Figure 1. GDP per Capita 10 Figure 2. GDP by Sector (Mainland) 11 Figure 2. GDP by Sector (Mainland) 11 Figure 3. GDP by Sector (Zanzibar) 11 Figure 3. GDP by Sector (Zanzibar) 11 Figure 4. Trade Statistics Framework 12 Figure 4. Trade Statistics Framework 12 Figure 5. Tanzania Trade Statistics by Broad Cluster 14 Figure 5. Tanzania Trade Statistics by Broad Cluster 14

Table of Contents . v Table of Contents . v

ootftf ttanzaniaanzania ffront.inddront.indd v 22/20/07/20/07 6:58:286:58:28 PMPM ootftf ttanzaniaanzania front.inddfront.indd v 22/20/07/20/07 66:58:28:58:28 PPMM Figure 6. The Evolution of a Developing Economy 19 Figure 6. The Evolution of a Developing Economy 19 Figure 7. Declining Basic Commodity Prices, 1845–1999 21 Figure 7. Declining Basic Commodity Prices, 1845–1999 21 Figure 8. Tanzania Exports 21 Figure 8. Tanzania Exports 21 Figure 9. The Virtuous Cycle 21 Figure 9. The Virtuous Cycle 21 Figure 10. Labor Force vs. GDP Composition 2001 (%) 23 Figure 10. Labor Force vs. GDP Composition 2001 (%) 23 Figure 11. Keys to ICT Usage 27 Figure 11. Keys to ICT Usage 27 Figure 12. Five Levels of ICT Usage 28 Figure 12. Five Levels of ICT Usage 28 Figure 13. Teledensity of Fixed vs. Mobile Telephony (1997–2002) 30 Figure 13. Teledensity of Fixed vs. Mobile Telephony (1997–2002) 30 Figure 14. Compound Annual Growth Rate of Fixed vs. Mobile Telephony Figure 14. Compound Annual Growth Rate of Fixed vs. Mobile Telephony (1997–2002) 30 (1997–2002) 30 Figure 15. Internet Users per 100 Inhabitants (1997–2002) 31 Figure 15. Internet Users per 100 Inhabitants (1997–2002) 31 Figure 16. Intra-Regional and US Rates 32 Figure 16. Intra-Regional and US Rates 32 Figure 17. Dial-up and High Speed Internet Monthly Costs 32 Figure 17. Dial-up and High Speed Internet Monthly Costs 32 Figure 18. The EASSY Project 33 Figure 18. The EASSY Project 33 Figure 19. National Fiber and Microwave Networks 34 Figure 19. National Fiber and Microwave Networks 34 Figure 20. Frequency of ICT Usage within Rural Areas 35 Figure 20. Frequency of ICT Usage within Rural Areas 35 Figure 21. Perceived Impact of Mobile Telephony on Financial Capital Figure 21. Perceived Impact of Mobile Telephony on Financial Capital among Rural Populations 35 among Rural Populations 35 Figure 22. School Enrollment Indicators 2002 36 Figure 22. School Enrollment Indicators 2002 36 Figure 23. World Coffee Price Index 43 Figure 23. World Coffee Price Index 43 Figure 24. Leading Cashew Producing Countries 45 Figure 24. Leading Cashew Producing Countries 45 Figure 25. Tanzanite Value Chain and Potential ICT Improvements 50 Figure 25. Tanzanite Value Chain and Potential ICT Improvements 50 Figure 26. Customer Portrait(TM) of the Traveler to East Africa 52 Figure 26. Customer Portrait(TM) of the Traveler to East Africa 52 Figure 27. Inbound Tourism Arrivals 52 Figure 27. Inbound Tourism Arrivals 52 Figure 28. Average Length of Stay 53 Figure 28. Average Length of Stay 53 Figure 29. In-country Tourism Expenditure 53 Figure 29. In-country Tourism Expenditure 53 Figure 30. Spend per Day 54 Figure 30. Spend per Day 54 Figure 31. Tourist Experience and Potential ICT Improvements 55 Figure 31. Tourist Experience and Potential ICT Improvements 55 Figure 32. Outbound Calls to the U.S. 59 Figure 32. Outbound Calls to the U.S. 59 Figure 33. Means of Communication Utilized by SMEs 60 Figure 33. Means of Communication Utilized by SMEs 60 Figure 34. Annual Total Investment in ICT 60 Figure 34. Annual Total Investment in ICT 60 Figure 35. Computer Usage 61 Figure 35. Computer Usage 61 Figure 36. BDS Services 65 Figure 36. BDS Services 65

vi . Improving Competitiveness and Increasing Economic Growth in Tanzania vi . Improving Competitiveness and Increasing Economic Growth in Tanzania

ootftf ttanzaniaanzania ffront.inddront.indd vivi 22/20/07/20/07 6:58:286:58:28 PMPM ootftf ttanzaniaanzania front.inddfront.indd vivi 22/20/07/20/07 66:58:28:58:28 PPMM Figure 37. TCRA Converged Licensing Framework 73 Figure 37. TCRA Converged Licensing Framework 73 Figure 38. E-Government Stage vs. Capacity, Selected African Countries 2001 76 Figure 38. E-Government Stage vs. Capacity, Selected African Countries 2001 76 Figure 39. Tanzania Top 5 Exports by Country Export Value 93 Figure 39. Tanzania Top 5 Exports by Country Export Value 93 Figure 40. Tanzania Exports by Country and World Share, 2003 93 Figure 40. Tanzania Exports by Country and World Share, 2003 93 Figure 41. Distribution of Tanzanian Imports 94 Figure 41. Distribution of Tanzanian Imports 94 Figure 42. Tanzania’s Trade Balance 95 Figure 42. Tanzania’s Trade Balance 95 Figure 43. Tanzania’s Current Stage and Broad Cluster State 96 Figure 43. Tanzania’s Current Stage and Broad Cluster State 96

TABLES TABLES Table 1. Tanzania: Destination of Exports and Imports, Table 1. Tanzania: Destination of Exports and Imports, 2000–2003 (% of total exports) 15 2000–2003 (% of total exports) 15 Table 2. Estimated Backbone Investment Costs 34 Table 2. Estimated Backbone Investment Costs 34 Table 3. Annual Private Rates of Return to Education and Training 38 Table 3. Annual Private Rates of Return to Education and Training 38 Table 4. Selected Exports Compound Annual Growth 1998–2003 42 Table 4. Selected Exports Compound Annual Growth 1998–2003 42 Table 5. Minerals Production 48 Table 5. Minerals Production 48 Table 6. Costs of Website Design and Hosting 58 Table 6. Costs of Website Design and Hosting 58 Table 7. ICT Alliance Structure 66 Table 7. ICT Alliance Structure 66 Table 8. Productive Sector ICT Strategies 72 Table 8. Productive Sector ICT Strategies 72 Table 9. Tanzania Exports 91 Table 9. Tanzania Exports 91 Table 10. Marketed Production of Major Export Commodities (Zanzibar) 91 Table 10. Marketed Production of Major Export Commodities (Zanzibar) 91 Table 11. Inbound Tourism Arrivals 91 Table 11. Inbound Tourism Arrivals 91 Table 12. Average Length of Stay 92 Table 12. Average Length of Stay 92 Table 13. In-country Tourism Expenditure 92 Table 13. In-country Tourism Expenditure 92 Table 14. Spend per Day 92 Table 14. Spend per Day 92 Table 15. Top 50 Tanzanian Industries (1–50) by Export Value, 2003 97 Table 15. Top 50 Tanzanian Industries (1–50) by Export Value, 2003 97 Table 16. Main Telephone Lines 99 Table 16. Main Telephone Lines 99 Table 17. Local Telephone Network 2002 99 Table 17. Local Telephone Network 2002 99 Table 18. Teleaccessibility 2002 100 Table 18. Teleaccessibility 2002 100 Table 19. Telephone Tariffs 2002 100 Table 19. Telephone Tariffs 2002 100 Table 20. Mobile Cellular Subscribers 2002 101 Table 20. Mobile Cellular Subscribers 2002 101 Table 21. Information Technology 2002 101 Table 21. Information Technology 2002 101

Table of Contents . vii Table of Contents . vii

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among other benefits. But this tool will only be use- among other benefits. But this tool will only be use- EXECUTIVE ful to firms and industries committed to pursuing EXECUTIVE ful to firms and industries committed to pursuing innovative, competitive strategies. In order for ICT innovative, competitive strategies. In order for ICT to contribute to the economy’s expansion, this to contribute to the economy’s expansion, this SUMMARY study’s fundamental premise is that Tanzania’s lead- SUMMARY study’s fundamental premise is that Tanzania’s leaders must also commit to building a stronger founda- ers must also commit to building a stronger foundation for economic competitiveness. tion for economic competitiveness. Introduction Introduction Driving along the stretch of road that connects the The study begins by dissecting Tanzania’s current eco- Driving along the stretch of road that connects the The study begins by dissecting Tanzania’s current eco- city of Arusha to the coffee growers and association nomic situation and exploring the barriers to growth city of Arusha to the coffee growers and association nomic situation and exploring the barriers to growth offices in Moshi, Tanzania’s contrasts are visibly and competitiveness, followed by a broader discussion offices in Moshi, Tanzania’s contrasts are visibly and competitiveness, followed by a broader discussion striking. Looking out at the lush lowlands against of growth and competitiveness as models for revealing striking. Looking out at the lush lowlands against of growth and competitiveness as models for revealing the backdrop of the mountainous Kilimanjaro a nation’s unique development path. Applying this the backdrop of the mountainous Kilimanjaro a nation’s unique development path. Applying this region, the magnificence of the country’s ecological model to Tanzania, it focuses on a direction for the region, the magnificence of the country’s ecological model to Tanzania, it focuses on a direction for the resources is overwhelming. This vast area is home country, and finally, how this direction can inform resources is overwhelming. This vast area is home country, and finally, how this direction can inform to a wealth of mineral resources, including newly future action. A perspective on the most urgent choic- to a wealth of mineral resources, including newly future action. A perspective on the most urgent choic- exploited gold deposits and precious stones such as es facing Tanzania today is captured in a recommen- exploited gold deposits and precious stones such as es facing Tanzania today is captured in a recommen- the rare Tanzanite gem. The region’s fertile soil pro- dations section at the end of the study. the rare Tanzanite gem. The region’s fertile soil pro- dations section at the end of the study. duces a rich Arabica coffee sold in specialty stores duces a rich Arabica coffee sold in specialty stores in the US and Europe. But a closer look reveals a Tanzanian Growth and in the US and Europe. But a closer look reveals a Tanzanian Growth and dilapidated and poorly maintained infrastructure. Competitiveness dilapidated and poorly maintained infrastructure. Competitiveness Farmers in the field use manual hoes or livestock to Farmers in the field use manual hoes or livestock to To ensure that future generations enjoy greater To ensure that future generations enjoy greater tend to their crops. It is a stark contrast, one that tend to their crops. It is a stark contrast, one that opportunities and increased prosperity, Tanzania opportunities and increased prosperity, Tanzania captures the country’s unrealized potential. captures the country’s unrealized potential. must transform the way it competes. Tanzania’s his- must transform the way it competes. Tanzania’s his- toric model has been to compete on its abundant toric model has been to compete on its abundant Tanzania faces enormous challenges in reaching this Tanzania faces enormous challenges in reaching this basic natural resources or factor inputs and cheap basic natural resources or factor inputs and cheap potential, even relative to its African neighbors. potential, even relative to its African neighbors. labor. This pattern is both clear and understand- labor. This pattern is both clear and understand- GDP per capita in 2004 was just US$ 322, 28% GDP per capita in 2004 was just US$ 322, 28% able. Its agricultural sector has benefited from able. Its agricultural sector has benefited from lower than the average for low income countries.1 lower than the average for low income countries.1 favorable climatic conditions and rich soil. Its favorable climatic conditions and rich soil. Its Already one of the poorest countries in the world, Already one of the poorest countries in the world, tourist industry has capitalized on such natural tourist industry has capitalized on such natural Tanzania experienced negligible growth over the last Tanzania experienced negligible growth over the last endowments as the Serengeti and Mount endowments as the Serengeti and Mount decade. GDP per capita compound annual growth decade. GDP per capita compound annual growth Kilimanjaro. Its mining sector has extracted pre- Kilimanjaro. Its mining sector has extracted pre- from 1990 to 2003 was just 1.0%.2 Dramatic from 1990 to 2003 was just 1.0%.2 Dramatic cious minerals and gemstones, exporting large cious minerals and gemstones, exporting large export growth in mining and minerals, driven by export growth in mining and minerals, driven by amounts of Tanzania’s natural wealth in its raw amounts of Tanzania’s natural wealth in its raw market forces outside Tanzania’s control, masks dis- market forces outside Tanzania’s control, masks dis- form, without capturing much of the value. form, without capturing much of the value. appointing results in the agricultural sector, which appointing results in the agricultural sector, which contributes much higher proportions of GDP and is Countries following such a model are competing on contributes much higher proportions of GDP and is Countries following such a model are competing on responsible for the livelihood of more than 80% of comparative advantage. Comparative advantage in responsible for the livelihood of more than 80% of comparative advantage. Comparative advantage in the population. Significant economic growth is nec- the age of globalization and innovation is no longer the population. Significant economic growth is nec- the age of globalization and innovation is no longer essary to improve the wealth of the average an effective platform for increasing prosperity. In essary to improve the wealth of the average an effective platform for increasing prosperity. In Tanzanian, and yet this goal remains elusive. today’s global economy, these types of resources are Tanzanian, and yet this goal remains elusive. today’s global economy, these types of resources are more plentiful or less important than in the past, more plentiful or less important than in the past, The aim of this study is to define the appropriate reducing their value and undermining the wealth of The aim of this study is to define the appropriate reducing their value and undermining the wealth of role of Information and Communications societies built on comparative advantage economies. role of Information and Communications societies built on comparative advantage economies. Technologies (ICT) in elevating the growth and Technologies (ICT) in elevating the growth and competitiveness of Tanzania, and to identify actions It is clear that this model is no longer working for competitiveness of Tanzania, and to identify actions It is clear that this model is no longer working for that will facilitate this role. Used effectively, ICT Tanzania. Despite favorable conditions, most of the that will facilitate this role. Used effectively, ICT Tanzania. Despite favorable conditions, most of the can be a powerful economic tool, helping firms and population is engaged in subsistence farming on can be a powerful economic tool, helping firms and population is engaged in subsistence farming on industries reach new markets, reduce communication small plots, and the country’s few cash crops such industries reach new markets, reduce communication small plots, and the country’s few cash crops such and coordination costs, increase transparency— as coffee and cashews have lost significant value and coordination costs, increase transparency— as coffee and cashews have lost significant value

1 World Development indicators, World Bank 2004 1 World Development indicators, World Bank 2004 2 Ibid 2 Ibid

Executive Summary . 1 Executive Summary . 1 WB tanzania text 2-27.qxd 2/27/07 11:50 AM Page 2 WB tanzania text 2-27.qxd 2/27/07 11:50 AM Page 2

over the last decade. As commodity prices have fallen, In targeting key sector initiatives, Tanzania’s public over the last decade. As commodity prices have fallen, In targeting key sector initiatives, Tanzania’s public most producers have been caught in a cycle of and private sector leaders must choose industries most producers have been caught in a cycle of and private sector leaders must choose industries declining quality and quantity. Exports in cashews that have the revenue and employment potential declining quality and quantity. Exports in cashews that have the revenue and employment potential have fallen by 50% CAGR in the last five years, to help the country reach its national objectives. have fallen by 50% CAGR in the last five years, to help the country reach its national objectives. and coffee exports fell by 8% over the same period. Ideally, the data and analysis in this report–which and coffee exports fell by 8% over the same period. Ideally, the data and analysis in this report–which Tanzanian tourism offerings have also been com- focuses on the coffee, cashews, minerals and Tanzanian tourism offerings have also been com- focuses on the coffee, cashews, minerals and moditized, easily replaced by regional competition. tourism sectors–can be used as a foundation to moditized, easily replaced by regional competition. tourism sectors–can be used as a foundation to Visitor arrival numbers and spend-per-day are formalize support for priority sectors and test Visitor arrival numbers and spend-per-day are formalize support for priority sectors and test falling, even as these indicators improve in the rest hypotheses about how to upgrade these industries. falling, even as these indicators improve in the rest hypotheses about how to upgrade these industries. of the region. Similar commodity dynamics in the of the region. Similar commodity dynamics in the mining industry, where most of the value is accrued All four of these sectors show exciting growth poten- mining industry, where most of the value is accrued All four of these sectors show exciting growth poten- outside the country, confirm this trend: competing tial. In agribusinesses, the economy’s largest sector, outside the country, confirm this trend: competing tial. In agribusinesses, the economy’s largest sector, exclusively on comparative advantage will ensure the government of Tanzania (GOT) has already exclusively on comparative advantage will ensure the government of Tanzania (GOT) has already the poverty of the average Tanzanian. recognized the need to move toward value added the poverty of the average Tanzanian. recognized the need to move toward value added products and specialty markets, but lacks informed products and specialty markets, but lacks informed The most successful countries in today’s global national strategies for the major agricultural sub sec- The most successful countries in today’s global national strategies for the major agricultural sub sec- economy invest in developing competitive tors. Specialty coffee exports by the growers’ associa- economy invest in developing competitive tors. Specialty coffee exports by the growers’ associa- advantage, in creating wealth by exporting complex tion, KILICAFE, have proven that coffee can be advantage, in creating wealth by exporting complex tion, KILICAFE, have proven that coffee can be products and services created by highly skilled peo- upgraded to reap premium prices.3 The opportunity products and services created by highly skilled peo- upgraded to reap premium prices.3 The opportunity ple. A nation’s ability to build and sustain these is similar in cashews, where currently only 10% of ple. A nation’s ability to build and sustain these is similar in cashews, where currently only 10% of advantages–a nation’s competitiveness–is a key driver Tanzania’s production is processed in country. advantages–a nation’s competitiveness–is a key driver Tanzania’s production is processed in country. of growth and prosperity. In order to create and Investing in vertically integrating this industry of growth and prosperity. In order to create and Investing in vertically integrating this industry distribute new wealth, Tanzania must build sectors would create over 30,000 direct jobs, and increase distribute new wealth, Tanzania must build sectors would create over 30,000 direct jobs, and increase and firms that can innovate in response to market the average price per ton from a current US$580 to and firms that can innovate in response to market the average price per ton from a current US$580 to demand, and begin the transition from a subsis- US$2,934 for processed nuts.4 demand, and begin the transition from a subsis- US$2,934 for processed nuts.4 tence economy to an export economy. The country tence economy to an export economy. The country must focus on creating an environment in which The mining sector is another potential economic must focus on creating an environment in which The mining sector is another potential economic the number of competitive firms, both export- bright spot. Production grew at an astounding com- the number of competitive firms, both export- bright spot. Production grew at an astounding com- oriented and domestic, can expand quickly. pound annual growth rate of 56.1% from 1999 to oriented and domestic, can expand quickly. pound annual growth rate of 56.1% from 1999 to 20035, even though margins are small due to the 20035, even though margins are small due to the This is not a simple task in an economy such as concentration of raw minerals. Impending regulatory This is not a simple task in an economy such as concentration of raw minerals. Impending regulatory Tanzania, where exports are currently only 12% of changes forcing forward integration into lapidary Tanzania, where exports are currently only 12% of changes forcing forward integration into lapidary GDP. For Tanzania to achieve accelerated rates of and jewelry may have positive effects, but only if the GDP. For Tanzania to achieve accelerated rates of and jewelry may have positive effects, but only if the economic growth, two sets of objectives must be industry is sufficiently prepared for these changes. economic growth, two sets of objectives must be industry is sufficiently prepared for these changes. pursued simultaneously. The first is to develop the pursued simultaneously. The first is to develop the competitiveness of Tanzania’s key industries. The Finally, tourism is a key industry with unrealized competitiveness of Tanzania’s key industries. The Finally, tourism is a key industry with unrealized second is to develop support programs and initia- value to contribute to the Tanzanian economy. second is to develop support programs and initia- value to contribute to the Tanzanian economy. tives that strengthen Tanzanian SMEs and the Tanzania has a strong consumer brand and average tives that strengthen Tanzanian SMEs and the Tanzania has a strong consumer brand and average Tanzanian private sector overall. This will create the length of stay has grown from 7.7 days in 1999 to 11 Tanzanian private sector overall. This will create the length of stay has grown from 7.7 days in 1999 to 11 kind of virtuous cycle the country needs to trans- days in 2003, due to the stabilization of Zanzibar.6 kind of virtuous cycle the country needs to trans- days in 2003, due to the stabilization of Zanzibar.6 form its economy, a path followed by many for- If Tanzania continues to invest in upgrading its com- form its economy, a path followed by many for- If Tanzania continues to invest in upgrading its com- merly developing economies: key industries ‘pull’ petitiveness in tourism, the industry’s multiplier merly developing economies: key industries ‘pull’ petitiveness in tourism, the industry’s multiplier the rest of the economy, while business develop- effects could touch every citizen in the country. But the rest of the economy, while business develop- effects could touch every citizen in the country. But ment services and an improved enabling environ- this process will require a shift in strategy to compete ment services and an improved enabling environ- this process will require a shift in strategy to compete ment ‘push’ the capacity of the private sector to in today’s global tourism game—to create the kinds of ment ‘push’ the capacity of the private sector to in today’s global tourism game—to create the kinds of respond to new opportunities. complex, unique experiences for which international respond to new opportunities. complex, unique experiences for which international

3 One of the promising signs comes from the members of the Association of Kilimanjaro Specialty Coffee Growers (AKSCG), also known under the trade 3 One of the promising signs comes from the members of the Association of Kilimanjaro Specialty Coffee Growers (AKSCG), also known under the trade name of KILICAFE. This example will be detailed in the study, but they have concentrated on increasing the quality and value of their coffee, and have sold name of KILICAFE. This example will be detailed in the study, but they have concentrated on increasing the quality and value of their coffee, and have sold 38% of their coffee as specialty grade. KILICAFE was also the first recipient of a direct-export license for coffee and, as such, was able to directly access 38% of their coffee as specialty grade. KILICAFE was also the first recipient of a direct-export license for coffee and, as such, was able to directly access premium buyers in the US and Europe. These customers are sophisticated and demanding, but are willing to pay a premium from a supplier who can con- premium buyers in the US and Europe. These customers are sophisticated and demanding, but are willing to pay a premium from a supplier who can consistently provide a very high quality coffee. sistently provide a very high quality coffee. 4 Ibid 4 Ibid 5 Bank of Tanzania, Economic Bulletin 5 Bank of Tanzania, Economic Bulletin 6 World Tourism Organization 6 World Tourism Organization

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tourists will pay a premium. It will depend on deeper Connecting with Customers. Website marketing tourists will pay a premium. It will depend on deeper Connecting with Customers. Website marketing knowledge of customer preferences, an increasing of specialty coffee producers is helping to build knowledge of customer preferences, an increasing of specialty coffee producers is helping to build ability to create customized offerings, and a greater strong relationships with importers and roasters ability to create customized offerings, and a greater strong relationships with importers and roasters investment in operational efficiency. by showing the coffee’s origins and its benefit to investment in operational efficiency. by showing the coffee’s origins and its benefit to local communities. local communities. Information, Communications Information, Communications and Competitiveness Increasing Efficiency. Tourism companies would and Competitiveness Increasing Efficiency. Tourism companies would As Tanzanian firms begin improving their strategies benefit greatly from using ICT to network with As Tanzanian firms begin improving their strategies benefit greatly from using ICT to network with and operations, ICT play a vital role. Technology financial institutions and allow for credit card and operations, ICT play a vital role. Technology financial institutions and allow for credit card cannot offer a miracle cure for dormant industries transactions, a major input into tourists’ choice of cannot offer a miracle cure for dormant industries transactions, a major input into tourists’ choice of and businesses, but without the ability to consume hotels, tour operators and other major purchases. and businesses, but without the ability to consume hotels, tour operators and other major purchases. information and communicate—both internally information and communicate—both internally and externally–Tanzania cannot continue to Creating Differentiation. In the gemstone indus- and externally–Tanzania cannot continue to Creating Differentiation. In the gemstone indus- strengthen its position in the global economy. In try, investments in computer-aided manufactur- strengthen its position in the global economy. In try, investments in computer-aided manufactur- other words, in a competitiveness model of growth, ing (CAD CAM) products are being explored, other words, in a competitiveness model of growth, ing (CAD CAM) products are being explored, investments in ICT must be guided by strategy. A which could be leveraged to create unique, dis- investments in ICT must be guided by strategy. A which could be leveraged to create unique, dis- major part of this study, therefore, is devoted to tinctly Tanzanian designs, enhancing differentia- major part of this study, therefore, is devoted to tinctly Tanzanian designs, enhancing differentia- exploring how Tanzania can develop more competition and increasing the value of jewelry exports. exploring how Tanzania can develop more competition and increasing the value of jewelry exports. tive industries and firms, followed by the specific tive industries and firms, followed by the specific role that ICT can play in that transition. These illustrations of the potential value of ICT in role that ICT can play in that transition. These illustrations of the potential value of ICT in improving the competitiveness of Tanzanian firms improving the competitiveness of Tanzanian firms The value of ICT grows as firms adopt more competi- capture only one part of the equation, the role of The value of ICT grows as firms adopt more competi- capture only one part of the equation, the role of tive strategies and vertically integrate into value-added firm-level strategy and operations. These upgrades tive strategies and vertically integrate into value-added firm-level strategy and operations. These upgrades offerings. As a result, ICT needs can vary significantly cannot happen, however, without an effective offerings. As a result, ICT needs can vary significantly cannot happen, however, without an effective across firms and industries, often driven by an organi- enabling environment–one that makes ICT relevant, across firms and industries, often driven by an organi- enabling environment–one that makes ICT relevant, zation’s place in the value chain. While coffee growers reliable and affordable. The GOT and multilateral zation’s place in the value chain. While coffee growers reliable and affordable. The GOT and multilateral might benefit from mobile communications to make donor organizations must partner with the private might benefit from mobile communications to make donor organizations must partner with the private price comparisons, for example, exporters will need sector to create an environment where innovative price comparisons, for example, exporters will need sector to create an environment where innovative e-commerce capabilities to transact with sophisticated Tanzanian businesses can use ICT as a tool for e-commerce capabilities to transact with sophisticated Tanzanian businesses can use ICT as a tool for buyers abroad. The early adopters in Tanzania and the building competitiveness and capturing market buyers abroad. The early adopters in Tanzania and the building competitiveness and capturing market experience of successfully developing economies show opportunities. The following is an overview of the experience of successfully developing economies show opportunities. The following is an overview of the a path where ICT–broadly defined—can become a report’s recommendations for building this type of a path where ICT–broadly defined—can become a report’s recommendations for building this type of ubiquitous economic tool, customized to the needs environment. ubiquitous economic tool, customized to the needs environment. and sophistication of a particular user. and sophistication of a particular user.

Many SMEs, however, remain unconvinced of the Many SMEs, however, remain unconvinced of the value of ICT. Only 28.2% of SMEs in one survey value of ICT. Only 28.2% of SMEs in one survey used a computer-based medium such as email, and RECOMMENDATIONS used a computer-based medium such as email, and RECOMMENDATIONS 76% of SMEs make no annual investment in ICT.7 76% of SMEs make no annual investment in ICT.7 This is a rational trend. The benefits of SME usage 1. Strengthen SMEs through Incubation This is a rational trend. The benefits of SME usage 1. Strengthen SMEs through Incubation of ICT have been ambiguous, at best. But as tacti- of ICT have been ambiguous, at best. But as tactical support helps these firms to upgrade their oper- and Business Development Services cal support helps these firms to upgrade their oper- and Business Development Services ations and strategies, this dynamic will shift. Below (BDS) ations and strategies, this dynamic will shift. Below (BDS) are recent examples of this trend in Tanzania, as One approach to jumpstarting the capacity and are recent examples of this trend in Tanzania, as One approach to jumpstarting the capacity and well as some promising opportunities: competitiveness of SMEs is to create additional well as some promising opportunities: competitiveness of SMEs is to create additional support mechanisms such as BDS and incubation support mechanisms such as BDS and incubation Improving Logistics. The growth of “traceability” sys- services. These services can help SMEs target better, Improving Logistics. The growth of “traceability” sys- services. These services can help SMEs target better, tems in agribusiness and mining reflect a response often niche markets, improve productivity, and tems in agribusiness and mining reflect a response often niche markets, improve productivity, and to consumer demand for knowing the source and serve more sophisticated customers. By providing to consumer demand for knowing the source and serve more sophisticated customers. By providing treatment of food products, coffee and gems. hands-on technical assistance, service providers can treatment of food products, coffee and gems. hands-on technical assistance, service providers can

7 Kijo-Ringo, Natujwa Daniel, “Impact of Investment in and Utilization of Information and Communication Technologies on Market Extension: Overview of 7 Kijo-Ringo, Natujwa Daniel, “Impact of Investment in and Utilization of Information and Communication Technologies on Market Extension: Overview of Small and Medium Enterprises in Tanzania”, University of Dar es Salaam, November 2004 Small and Medium Enterprises in Tanzania”, University of Dar es Salaam, November 2004

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help firms work through the complex process of cross-cutting competence across ministries would help firms work through the complex process of cross-cutting competence across ministries would understanding markets, planning for multiple sce- allow the government to be more responsive to the understanding markets, planning for multiple sce- allow the government to be more responsive to the narios, and capturing their firm’s potential worth in needs of different sectors. narios, and capturing their firm’s potential worth in needs of different sectors. the specific structure and language of a business the specific structure and language of a business plan that can be used to facilitate financing. The recommendations also stress the need for plan that can be used to facilitate financing. The recommendations also stress the need for forums that foster public-private dialogue and give forums that foster public-private dialogue and give One challenge for Tanzania is that access to BDS the private sector a seat at the table in policy mak- One challenge for Tanzania is that access to BDS the private sector a seat at the table in policy mak- offerings has been concentrated in Dar es Salaam, ing. Issues like e-commerce and facilitating credit offerings has been concentrated in Dar es Salaam, ing. Issues like e-commerce and facilitating credit provided in an uncoordinated manner, and card transactions rank high among the Tanzanian provided in an uncoordinated manner, and card transactions rank high among the Tanzanian focused on either very basic micro-enterprises or private sector’s priorities. These needs illustrate a focused on either very basic micro-enterprises or private sector’s priorities. These needs illustrate a large companies8. The development of a national fundamental truth about successful economies: a large companies8. The development of a national fundamental truth about successful economies: a BDS network that serves as a one-stop-shop for strong competitive environment for the private BDS network that serves as a one-stop-shop for strong competitive environment for the private the SME sector would help to address some of sector rests on an informed and responsive public the SME sector would help to address some of sector rests on an informed and responsive public these gaps. A special focus on agribusiness firms sector. these gaps. A special focus on agribusiness firms sector. and rural regions could have a significant impact and rural regions could have a significant impact on the productivity of the largest and poorest There are some relatively quick potential wins. By on the productivity of the largest and poorest There are some relatively quick potential wins. By sectors of the population. sharing best practices in the region and abroad, sectors of the population. sharing best practices in the region and abroad, Tanzania’s government could increase the speed of Tanzania’s government could increase the speed of A greater investment in business incubators would its transition from paper to electronic systems and A greater investment in business incubators would its transition from paper to electronic systems and also help entrepreneurs to survive the risky start-up centralize back office systems. The effective provi- also help entrepreneurs to survive the risky start-up centralize back office systems. The effective provi- phase by providing a range of services, from hands- sion of citizen services will become increasingly phase by providing a range of services, from hands- sion of citizen services will become increasingly on management/technical assistance and access to dependent on the government’s ability to digitize its on management/technical assistance and access to dependent on the government’s ability to digitize its finance, to support services and infrastructure such processes. finance, to support services and infrastructure such processes. as office space and communication facilities. These as office space and communication facilities. These incubators would also serve as powerful, high-profile 3. Create an ICT Alliance incubators would also serve as powerful, high-profile 3. Create an ICT Alliance mechanisms for supporting technology-based firms The ICT sector itself is nascent, but it will grow as mechanisms for supporting technology-based firms The ICT sector itself is nascent, but it will grow as and nurturing innovation and entrepreneurship, domestic firms pursuing competitive strategies gen- and nurturing innovation and entrepreneurship, domestic firms pursuing competitive strategies gen- both urgently needed in Tanzania. erate local demand for ICT solutions. This will shift both urgently needed in Tanzania. erate local demand for ICT solutions. This will shift the focus of the sector away from large government the focus of the sector away from large government 2. Increase the Efficiency and or donor contracts and towards providing cus- 2. Increase the Efficiency and or donor contracts and towards providing cus- Responsiveness of the Public Sector tomized solutions to innovative Tanzanian firms. Responsiveness of the Public Sector tomized solutions to innovative Tanzanian firms. Creating a more efficient, more responsive public One way to encourage this transition is to create an Creating a more efficient, more responsive public One way to encourage this transition is to create an sector is another important aspect of building an “ICT Alliance” between ICT service providers and sector is another important aspect of building an “ICT Alliance” between ICT service providers and enabling environment. While the onus of the buyers in order to communicate more effectively and enabling environment. While the onus of the buyers in order to communicate more effectively and responsibility falls on the private sector to make promote ‘solution-based selling’, where providers responsibility falls on the private sector to make promote ‘solution-based selling’, where providers their businesses more successful, governments and understand their customers’ problems at an intimate their businesses more successful, governments and understand their customers’ problems at an intimate their donor partners can help limit or eliminate level. These working groups allow ICT providers their donor partners can help limit or eliminate level. These working groups allow ICT providers barriers to the effective use of ICT (such as high (hardware, software and training), as well as govern- barriers to the effective use of ICT (such as high (hardware, software and training), as well as govern- telecomm prices and import tariffs on ICT goods), ment as the regulator, to engage ICT stakeholders telecomm prices and import tariffs on ICT goods), ment as the regulator, to engage ICT stakeholders and can use ICT themselves to facilitate transactions in a structured manner. As part of the Alliance and can use ICT themselves to facilitate transactions in a structured manner. As part of the Alliance (e-procurement, customs and ports’ logistic, etc). Partnership, private sector advocacy and awareness (e-procurement, customs and ports’ logistic, etc). Partnership, private sector advocacy and awareness can also be elevated by funding workshops in which can also be elevated by funding workshops in which ICT coordination within the government needs to SMEs explore ICT solutions. ICT coordination within the government needs to SMEs explore ICT solutions. be reinforced to exploit potential synergies and be reinforced to exploit potential synergies and make ICT policy more focused and relevant to the Like any sector poised for growth, the ICT sector make ICT policy more focused and relevant to the Like any sector poised for growth, the ICT sector rest of the economy. As a tool for strengthening the will require investment capital. This can be a major rest of the economy. As a tool for strengthening the will require investment capital. This can be a major economy as a whole, ICT should be represented stumbling block for local firms as they can be economy as a whole, ICT should be represented stumbling block for local firms as they can be across ministries. Moving ICT policy from the viewed by financial institutions as riskier invest- across ministries. Moving ICT policy from the viewed by financial institutions as riskier invest- Ministry of Communications and Transport to a ments than more established industries. The forums Ministry of Communications and Transport to a ments than more established industries. The forums

8 Stevenson & Annette St-Onge. “Support for Growth-oriented Women Entrepreneurs in Tanzania”. International Labor Organization. 2005. 8 Stevenson & Annette St-Onge. “Support for Growth-oriented Women Entrepreneurs in Tanzania”. International Labor Organization. 2005. http://www.afdb.org/pls/portal/docs/PAGE/ADB_ADMIN_PG/DOCUMENTS/PRIVATE_SECTOR_OPERATIONS/ILO-TANZANIA_19.01.2005.PDF http://www.afdb.org/pls/portal/docs/PAGE/ADB_ADMIN_PG/DOCUMENTS/PRIVATE_SECTOR_OPERATIONS/ILO-TANZANIA_19.01.2005.PDF

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created by the Alliance, could also help to bring current education levels prevent them from engag- created by the Alliance, could also help to bring current education levels prevent them from engag- ICT firms, donors, government and financial insti- ing in more complex transactions. Less than 1% of ICT firms, donors, government and financial insti- ing in more complex transactions. Less than 1% of tutions together to discuss the unique challenges the population attends tertiary education, mostly tutions together to discuss the unique challenges the population attends tertiary education, mostly that ICT firms face. Incubation of SMEs in the due to the low returns from such investment.11 The that ICT firms face. Incubation of SMEs in the due to the low returns from such investment.11 The ICT sector will help with the specific training needs government needs to address this reality, and begin ICT sector will help with the specific training needs government needs to address this reality, and begin of this group such as basic writing skills in English, to incorporate ICT into its education objectives. of this group such as basic writing skills in English, to incorporate ICT into its education objectives. customer service skills and training of trainers. Secondary schools present a good opportunity to customer service skills and training of trainers. Secondary schools present a good opportunity to introduce students to the value of ICT. introduce students to the value of ICT. 4. Build the Technical Platform 4. Build the Technical Platform for Growth Improving ability in the private sector requires a for Growth Improving ability in the private sector requires a different approach, and should be focused on different approach, and should be focused on A critical part of developing Tanzania’s global com- A critical part of developing Tanzania’s global com- enhancing training in applied ICT business skills. enhancing training in applied ICT business skills. petitiveness will be building the actual platform petitiveness will be building the actual platform One mechanism would be to strengthen the con- One mechanism would be to strengthen the con- for that growth. The limited use of ICT among for that growth. The limited use of ICT among nection between academia and the private sector. nection between academia and the private sector. Tanzanians today reveals the enormity of this barri- Tanzanians today reveals the enormity of this barri- However, the first step must be to conduct a However, the first step must be to conduct a er. Less than 2% of the population has access to er. Less than 2% of the population has access to needs assessment of the private sector, particularly needs assessment of the private sector, particularly mobile telephony, measured by handset ownership, mobile telephony, measured by handset ownership, SMEs, to understand the specific needs of SMEs, to understand the specific needs of and fixed lines are used by a dismal 1%.9 The and fixed lines are used by a dismal 1%.9 The Tanzanian businesses that must inform the design Tanzanian businesses that must inform the design country’s computing story is similar. Tanzania has country’s computing story is similar. Tanzania has of appropriate ICT training programs. These of appropriate ICT training programs. These one of the lowest usage rates in the region in terms one of the lowest usage rates in the region in terms trainings could ultimately be implemented by trainings could ultimately be implemented by of Internet hosts and computers. Internet density is of Internet hosts and computers. Internet density is academia, the private sector and/or members of the academia, the private sector and/or members of the particularly low at 0.23 users per 100 inhabitants.10 particularly low at 0.23 users per 100 inhabitants.10 ICT Alliance. ICT Alliance. The broadening of access to ICT can be accom- The broadening of access to ICT can be accomplished by improving international connectivity, plished by improving international connectivity, building out the national backbone infrastructure 6. Develop and Execute Competitive building out the national backbone infrastructure 6. Develop and Execute Competitive and addressing the digital divide between urban Strategies in Key Sectors and addressing the digital divide between urban Strategies in Key Sectors and rural areas. Tanzania’s biggest challenge to achieving sustained and rural areas. Tanzania’s biggest challenge to achieving sustained growth and competitiveness will be the dynamic, non- growth and competitiveness will be the dynamic, non- The high cost of connectivity is due primarily to linear process of upgrading its products and services. The high cost of connectivity is due primarily to linear process of upgrading its products and services. the use of satellite rather than cable to connect Given the reality of limited resources, minimal growth the use of satellite rather than cable to connect Given the reality of limited resources, minimal growth internationally. There are massive projects under- and significant barriers to global competitiveness, internationally. There are massive projects under- and significant barriers to global competitiveness, way to connect more of the country with fiber- Tanzania must be prepared not only to create a plat- way to connect more of the country with fiber- Tanzania must be prepared not only to create a plat- optic cable, both through the mainland and to the form for all businesses, but also to focus additional optic cable, both through the mainland and to the form for all businesses, but also to focus additional international underwater backbone. These projects resources on those key sectors of the economy that international underwater backbone. These projects resources on those key sectors of the economy that will make domestic connectivity more affordable will create the largest short-term gains in productivity will make domestic connectivity more affordable will create the largest short-term gains in productivity and reliable. Ensuring the success of these initia- and employment. Focusing in a structured way on and reliable. Ensuring the success of these initia- and employment. Focusing in a structured way on tives and limiting duplication of efforts should be a the most promising sectors will increase Tanzania’s tives and limiting duplication of efforts should be a the most promising sectors will increase Tanzania’s priority. The Tanzania Communications Regulatory chances of gaining the expertise and income to rein- priority. The Tanzania Communications Regulatory chances of gaining the expertise and income to rein- Authority (TCRA) will play a critical role in oper- vest in growing the rest of the economy. Authority (TCRA) will play a critical role in oper- vest in growing the rest of the economy. ating these networks, and this institution must also ating these networks, and this institution must also be able to enforce a fair playing field for telecom be able to enforce a fair playing field for telecom and data services providers so that new entrants can and data services providers so that new entrants can generate lower prices for consumers. generate lower prices for consumers. CONCLUSION CONCLUSION 5. Invest in Human Capital 5. Invest in Human Capital While access to appropriate technology and connec- The ultimate transformation of Tanzania’s economy While access to appropriate technology and connec- The ultimate transformation of Tanzania’s economy tivity are key elements of the growth equation, the will require more than strategic vision and resources. tivity are key elements of the growth equation, the will require more than strategic vision and resources. capacity of individual entrepreneurs and citizens to It will also require leadership. Building firm-level capacity of individual entrepreneurs and citizens to It will also require leadership. Building firm-level benefit from these tools is also critical. Tanzanians’ competitiveness across sectors is a formidable task, benefit from these tools is also critical. Tanzanians’ competitiveness across sectors is a formidable task,

9 ITU 2003 9 ITU 2003 10 Ibid 10 Ibid 11 World Development Indicators, World Bank 2004 11 World Development Indicators, World Bank 2004 12 World Development Indicators, World Bank 2004 12 World Development Indicators, World Bank 2004

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even in a stable macroeconomic environment, resources for managing successful change processes, even in a stable macroeconomic environment, resources for managing successful change processes, which Tanzania has succeeded in fostering. Among including creativity, energy and courage. With these which Tanzania has succeeded in fostering. Among including creativity, energy and courage. With these other critical tasks, public and private sector leaders ingredients in place, the magnificence of the road other critical tasks, public and private sector leaders ingredients in place, the magnificence of the road will need to work together to develop complex from Arusha to Moshi will become the only striking will need to work together to develop complex from Arusha to Moshi will become the only striking national sector strategies that can guide the micro- feature of the journey. Its current contrasts, symbols national sector strategies that can guide the micro- feature of the journey. Its current contrasts, symbols level strategies of hundreds of firms. It will require of unrealized prosperity, will be a distant memory level strategies of hundreds of firms. It will require of unrealized prosperity, will be a distant memory cultivating the less tangible, but no less critical for Tanzanians. cultivating the less tangible, but no less critical for Tanzanians.

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economic performance is lagging by both global economic performance is lagging by both global 2 TANZANIA and regional standards, with GDP per capita stand- 2 TANZANIA and regional standards, with GDP per capita stand- ing at US$ 322 in 2004.12 But there is reason for ing at US$ 322 in 2004.12 But there is reason for cautious optimism. The country’s macro indicators cautious optimism. The country’s macro indicators TODAY show a positive trend, and growth has been steady TODAY show a positive trend, and growth has been steady over the past five years. GDP climbed from US$ over the past five years. GDP climbed from US$ 9.1 billion in 1999 to US$ 11.1 billion in 2003. 9.1 billion in 1999 to US$ 11.1 billion in 2003. Tanzania also experienced growth in the total value Tanzania also experienced growth in the total value of its exports, from US$ 663.3 million in 2000 to of its exports, from US$ 663.3 million in 2000 to US$ 1,235.1 million in 2004, while inflation US$ 1,235.1 million in 2004, while inflation 2.1 A STARTING POINT dropped during this same period from 5.9% to 2.1 A STARTING POINT dropped during this same period from 5.9% to 5.0%. Stripping out the dramatic growth in miner- 5.0%. Stripping out the dramatic growth in miner- The challenges to economic growth in Tanzania are als from total exports, however, reveals a compound The challenges to economic growth in Tanzania are als from total exports, however, reveals a compound as vast as the country itself, which encompasses annual growth rate of exports from 2001 to 2003 as vast as the country itself, which encompasses annual growth rate of exports from 2001 to 2003 945,000 sq. km. Like many lower-income African of just 4.6%.13 At the same time, the country 945,000 sq. km. Like many lower-income African of just 4.6%.13 At the same time, the country countries, Tanzania is grappling with low levels of experienced growth in its foreign reserves, from countries, Tanzania is grappling with low levels of experienced growth in its foreign reserves, from education, poor infrastructure, limited healthcare, US$ 974.2 million to US$ 2,080 million.14 education, poor infrastructure, limited healthcare, US$ 974.2 million to US$ 2,080 million.14 and economic reliance on commodity-based natural and economic reliance on commodity-based natural resources. On Artadi & Martin’s “Global These positive economic indicators coupled with resources. On Artadi & Martin’s “Global These positive economic indicators coupled with Competitiveness Index,” which classifies countries recent political stability create an opportunity for Competitiveness Index,” which classifies countries recent political stability create an opportunity for into three stage based on means of production and Tanzania to embrace change, beginning its transfor- into three stage based on means of production and Tanzania to embrace change, beginning its transfor- ability to attract foreign direct investment, Tanzania mation from a nation focused primarily on subsis- ability to attract foreign direct investment, Tanzania mation from a nation focused primarily on subsis- scores on the low end of Stage 1 countries with a tence farming and commodity exporting into one scores on the low end of Stage 1 countries with a tence farming and commodity exporting into one score of 3.12.* To benchmark this number, Angola that produces complex products and services that score of 3.12.* To benchmark this number, Angola that produces complex products and services that ranks the lowest at 2.55 while the U.S. ranks the command premiums on world markets. With the ranks the lowest at 2.55 while the U.S. ranks the command premiums on world markets. With the highest at 5.21. Tanzania’s score is well below Sub- revenues that these activities generate, prosperity then highest at 5.21. Tanzania’s score is well below Sub- revenues that these activities generate, prosperity then Saharan African countries that will be used for com- comes into focus as a realistic goal. If these resources Saharan African countries that will be used for com- comes into focus as a realistic goal. If these resources parison throughout the study, including South are invested in education, healthcare, financial and parison throughout the study, including South are invested in education, healthcare, financial and Africa (4.08), Mauritius (3.86), Uganda (3.50), physical infrastructure, then future generations of Africa (4.08), Mauritius (3.86), Uganda (3.50), physical infrastructure, then future generations of Kenya (3.37) and Zambia (3.25). By both regional Tanzanians will have access to increased purchasing Kenya (3.37) and Zambia (3.25). By both regional Tanzanians will have access to increased purchasing and global standards, the snapshot of Tanzanian power and a higher standard of living. and global standards, the snapshot of Tanzanian power and a higher standard of living. development is stark. development is stark.

In addition to some of the more common challenges, In addition to some of the more common challenges, Tanzania is facing a complex transition from a socialist Tanzania is facing a complex transition from a socialist to democratic form of governance. Political stability in 2.2 GDP ANALYSIS to democratic form of governance. Political stability in 2.2 GDP ANALYSIS Zanzibar has been elusive, leading to lower investor Zanzibar has been elusive, leading to lower investor confidence. The historically strong role of govern- In mapping Tanzania’s transition to a more complex confidence. The historically strong role of govern- In mapping Tanzania’s transition to a more complex ment in economic planning has led to a low level of and prosperous economy, analysis of GDP and ment in economic planning has led to a low level of and prosperous economy, analysis of GDP and private sector sophistication, as well as a lack of public export data can offer useful insight into the coun- private sector sophistication, as well as a lack of public export data can offer useful insight into the coun- and private sector cooperation in achieving economic try’s path. GDP growth rates do not suggest an and private sector cooperation in achieving economic try’s path. GDP growth rates do not suggest an development goals. The shift to a market-based econ- optimistic outlook, given the low starting base of development goals. The shift to a market-based econ- optimistic outlook, given the low starting base of omy will require the private sector to become the Tanzania’s per capita income. Tanzania has experi- omy will require the private sector to become the Tanzania’s per capita income. Tanzania has experi- engine of growth, and this will be a shift that will enced modest GDP growth from 1999 to 2003 engine of growth, and this will be a shift that will enced modest GDP growth from 1999 to 2003 take time and effort in Tanzania. with year-on-year growth staying above 3.6% and take time and effort in Tanzania. with year-on-year growth staying above 3.6% and peaking at 6.2% from 2001 to 2002.15 Over the peaking at 6.2% from 2001 to 2002.15 Over the The impact of these issues is clear in the recent same time period, the population increased from The impact of these issues is clear in the recent same time period, the population increased from performance of the economy. Tanzania’s relative 32.9 million to 35.9 million.16 GDP growth did performance of the economy. Tanzania’s relative 32.9 million to 35.9 million.16 GDP growth did

*World Economic Forum Global Competitiveness Report, World Bank, 2005–2006, available at *World Economic Forum Global Competitiveness Report, World Bank, 2005–2006, available at http://www.weforum.org/en/initiatives/gcp/Global%20Competitiveness%20Report/index.htm http://www.weforum.org/en/initiatives/gcp/Global%20Competitiveness%20Report/index.htm 13 Bank of Tanzania, Economic Bulletin 13 Bank of Tanzania, Economic Bulletin 14 The Economist Intelligence Unit, Country Report: Tanzania. London, UK. February 2005 14 The Economist Intelligence Unit, Country Report: Tanzania. London, UK. February 2005 15 World Development Indicators, World Bank 2004 15 World Development Indicators, World Bank 2004 16 Ibid 16 Ibid

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FIGURE 1. GDP per Capita FIGURE 1. GDP per Capita

$4,500

$4,000

$3,500

$3,000

$2,500

$2,000

$1,500

$1,000 Constant 2000 International $ $500

$0 1999 2000 2001 2002 2003

Tanzania Uganda Kenya Mauritius South Africa Zambia

CAGR 3.3% CAGR 2.2% CAGR - 0.9% CAGR 2.8% CAGR 1.0% CAGR 1.9%

Source: World Bank World Development Indicators Source: World Bank World Development Indicators

not keep pace, therefore, generating a GDP per 7.2% in 2003. Mining’s share of GDP, in spite of its not keep pace, therefore, generating a GDP per 7.2% in 2003. Mining’s share of GDP, in spite of its Capita compound annual growth rate of just 3.3%, ascendancy in exports, is still low, growing from Capita compound annual growth rate of just 3.3%, ascendancy in exports, is still low, growing from from US$ 262.40 in 1999 to US$ 308.70 in 1.4% in 1999 to 1.9% in 2003. Some estimates from US$ 262.40 in 1999 to US$ 308.70 in 1.4% in 1999 to 1.9% in 2003. Some estimates 2003.17 Although this growth seems positive, a show mining eventually growing to 10% of GDP.18 2003.17 Although this growth seems positive, a show mining eventually growing to 10% of GDP.18 longer view reveals that GDP per capita growth has Although this contribution is small, mining remains longer view reveals that GDP per capita growth has Although this contribution is small, mining remains been muted with a compound annual growth rate a leader in exports, with gold accounting for US$ been muted with a compound annual growth rate a leader in exports, with gold accounting for US$ of 1.0% from 1990 to 2003. 442 million in 2002.19 of 1.0% from 1990 to 2003. 442 million in 2002.19

Compared to the other African countries reviewed As expected, Zanzibar relies less on agriculture as a Compared to the other African countries reviewed As expected, Zanzibar relies less on agriculture as a in this report, Tanzania’s 2003 GDP per capita is driver of GDP than does the mainland, reference in this report, Tanzania’s 2003 GDP per capita is driver of GDP than does the mainland, reference the second lowest, see Figure 1, with Mauritius the Figure 3. Instead, Wholesale & Retail Trade, the second lowest, see Figure 1, with Mauritius the Figure 3. Instead, Wholesale & Retail Trade, highest at US$ 4,161 in 2003. Encouragingly, Restaurants and Hotels hold the largest percentage highest at US$ 4,161 in 2003. Encouragingly, Restaurants and Hotels hold the largest percentage Tanzania’s CAGR from 1999 to 2003 is the highest. of GDP at 32.7% in 2002, although this number Tanzania’s CAGR from 1999 to 2003 is the highest. of GDP at 32.7% in 2002, although this number has consistently declined since from a peak of has consistently declined since from a peak of The three primary components of GDP on the 40.1% in 1999. This decline mirrors revenue dete- The three primary components of GDP on the 40.1% in 1999. This decline mirrors revenue dete- mainland are Agriculture, Forestry & Fishing; Trade rioration in the mainland’s tourism sector, and will mainland are Agriculture, Forestry & Fishing; Trade rioration in the mainland’s tourism sector, and will & Tourism and; Financial & Business Services, as be explored further in the section on Tourism. & Tourism and; Financial & Business Services, as be explored further in the section on Tourism. depicted in Figure 2. Agriculture, Forestry & Fishing depicted in Figure 2. Agriculture, Forestry & Fishing has remained stable at around 45% from 1999 to has remained stable at around 45% from 1999 to 2003, while Trade & Tourism has gradually declined 2.3 Sector Economic Performance 2003, while Trade & Tourism has gradually declined 2.3 Sector Economic Performance from 12.4% to 11.8%, and Financial & Business and Trade Statistics from 12.4% to 11.8%, and Financial & Business and Trade Statistics Services has steadily increased from 13.7% to 14.3% A key component of building the competitiveness Services has steadily increased from 13.7% to 14.3% A key component of building the competitiveness over the same time period. Manufacturing, a GOT of developing economies—in which, by definition, over the same time period. Manufacturing, a GOT of developing economies—in which, by definition, priority, consistently dropped from 7.5% in 2000 to needs are significant and resources limited—is the priority, consistently dropped from 7.5% in 2000 to needs are significant and resources limited—is the

17 Ibid 17 Ibid 18 Mwalyasi, Raphael B.B., “Impact Assessment and the Mining Industry: Perspectives from Tanzania, April 2004 18 Mwalyasi, Raphael B.B., “Impact Assessment and the Mining Industry: Perspectives from Tanzania, April 2004 19 The Economist Intelligence Unit, Country Report: Tanzania. London, UK. February 2005 19 The Economist Intelligence Unit, Country Report: Tanzania. London, UK. February 2005

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FIGURE 2. GDP by sector (Mainland) FIGURE 2. GDP by sector (Mainland)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% 1999 2000 2001 2002 2003

Agriculture, Forestry & Fishing Mining & Quarrying Manufacturing Construction Electricity & Water Trade & Tourism Transport & Communications Financial & Business Services Public Adminstration

source: Planning Commission, Economic Survey 2003 source: Planning Commission, Economic Survey 2003

FIGURE 3. GDP BY SECTOR (ZANZIBAR) FIGURE 3. GDP BY SECTOR (ZANZIBAR)

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1998 1999 2000 2001 2002

Agriculture, Forestry & Fishing Mining & Quarrying Manufacturing & Handicrafts Construction Electricity & Water Wholesale & Retail Trade, Rest. & Hotels Transport & Communications Finance & Insurance Public Adminstration

source: Planning Commission, Economic Survey 2003 source: Planning Commission, Economic Survey 2003

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ability to prioritize investment in industries based these industries are resource-based, with the exception ability to prioritize investment in industries based these industries are resource-based, with the exception on their relative potential to be globally competi- of semiconductors/computers, and competition is on their relative potential to be globally competi- of semiconductors/computers, and competition is tive. To that end, this section builds on GDP statis- mostly based on costs (i.e. gold, timber, oil, memory tive. To that end, this section builds on GDP statis- mostly based on costs (i.e. gold, timber, oil, memory tics and analyzes Tanzania’s trade patterns in relation chips). tics and analyzes Tanzania’s trade patterns in relation chips). to comparative and competitive advantage models to comparative and competitive advantage models of competition. The analysis of trade statistics is Across the middle row are broad end-use sectors of competition. The analysis of trade statistics is Across the middle row are broad end-use sectors explained and, finally, the data for Tanzania is involving industrial or supporting functions. These explained and, finally, the data for Tanzania is involving industrial or supporting functions. These presented. clusters are centers of complex operations and conduits presented. clusters are centers of complex operations and conduits of innovation and upgrading, characterized by com- of innovation and upgrading, characterized by com- This analysis is built on the idea that increasing petition based on differentiation as much as costs This analysis is built on the idea that increasing petition based on differentiation as much as costs Tanzania’s competitiveness is linked directly to the (i.e. power generators, motor vehicles, and scientific Tanzania’s competitiveness is linked directly to the (i.e. power generators, motor vehicles, and scientific ability of Tanzanian firms to increase exports. By instruments). Finally, the bottom row contains end- ability of Tanzanian firms to increase exports. By instruments). Finally, the bottom row contains end- exporting, Tanzanian firms will expand their mar- use sectors mostly associated with final consumption exporting, Tanzanian firms will expand their mar- use sectors mostly associated with final consumption kets beyond their own economy, increasing for- goods and services. In these sectors, competition is kets beyond their own economy, increasing for- goods and services. In these sectors, competition is eign exchange earnings and driving a net increase mostly driven by product differentiation (i.e. break- eign exchange earnings and driving a net increase mostly driven by product differentiation (i.e. break- in the population’s purchasing power and standard fast cereals, clothes, furniture). in the population’s purchasing power and standard fast cereals, clothes, furniture). of living. of living. The link between these three horizontal bands and The link between these three horizontal bands and 2.3.1 Methodology and Theory productivity upgrading is relatively straightforward. 2.3.1 Methodology and Theory productivity upgrading is relatively straightforward. To illustrate trade patterns and export flows, trade Economies generally begin the upgrading process To illustrate trade patterns and export flows, trade Economies generally begin the upgrading process charts are calculated for Tanzania over the from initial positions at the top (upstream indus- charts are calculated for Tanzania over the from initial positions at the top (upstream indus- 1992–2002 period (see the Appendices for complete tries, usually extractive natural resource-intensive 1992–2002 period (see the Appendices for complete tries, usually extractive natural resource-intensive trade charts). These trade flows are presented in a industries) or the bottom (final consumption goods trade charts). These trade flows are presented in a industries) or the bottom (final consumption goods chart separated by 3 broad cluster bands that reflect and services) bands of the trade chart. Resource-rich chart separated by 3 broad cluster bands that reflect and services) bands of the trade chart. Resource-rich consumption patterns in the economy. As illustrated countries typically begin with upstream industries, consumption patterns in the economy. As illustrated countries typically begin with upstream industries, in Figure 4, the first broad cluster band is depicted and gradually develop competitive industries in the in Figure 4, the first broad cluster band is depicted and gradually develop competitive industries in the in the top row and shows upstream-sectors charac- mid-band (industrial and supporting goods) or the in the top row and shows upstream-sectors charac- mid-band (industrial and supporting goods) or the terized by industries whose primary products are services sector by investing the rents extracted from terized by industries whose primary products are services sector by investing the rents extracted from inputs into products in other industries. Most of their resource exports into developing human and inputs into products in other industries. Most of their resource exports into developing human and

FIGURE 4. TRADE STATISTICS FRAMEWORK FIGURE 4. TRADE STATISTICS FRAMEWORK

“Broad Cluster” Definition Examples

• Primarily used as inputs into other • Gold 40% Upstream industries • Timber Industries • Competition primarily based on cost • Oil • Memory chips • Centers of complex operations • Power generators • Conduits of innovation and Industrial and • Motor vehicles upgrading 10% Supporting • PABXs • Competition on differentiation as Functions • TV tubes much as cost • Goods destined for final • Breakfast cereals consumption • Television sets 50% Competition traditionally on Final • • Jewelry diamonds differentiated products and services Consumption • Clothes • Furniture

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knowledge capital that allows them to make this from increased tax revenue, but much of the knowledge capital that allows them to make this from increased tax revenue, but much of the transition. This process of transformation allows value of these minerals is being captured by for- transition. This process of transformation allows value of these minerals is being captured by for- countries to lay the foundations of a complex indus- eign companies who own the mines and process countries to lay the foundations of a complex indus- eign companies who own the mines and process trial core or a thriving services sector that relies on the minerals outside of Tanzania. trial core or a thriving services sector that relies on the minerals outside of Tanzania. skilled human capital. 20 ■ High export concentration in commodity products. skilled human capital. 20 ■ High export concentration in commodity products. Tanzania’s export base consists primarily of tra- Tanzania’s export base consists primarily of tra- Resource-poor nations, in contrast, typically start ditional crops that add very limited processing Resource-poor nations, in contrast, typically start ditional crops that add very limited processing exporting labor-intensive final consumption goods and value to their products (i.e. coffee, tea, cot- exporting labor-intensive final consumption goods and value to their products (i.e. coffee, tea, cot- derived from basic agricultural products or simple ton, cashews, fishing and tobacco), though derived from basic agricultural products or simple ton, cashews, fishing and tobacco), though manufacturing. As these products are commodi- trending down relatively due to the increase in manufacturing. As these products are commodi- trending down relatively due to the increase in tized and price competition becomes fierce, coun- extraction upstream industries. Sectors located tized and price competition becomes fierce, coun- extraction upstream industries. Sectors located tries should start focusing on a number of niche in this band provide a starting point for earning tries should start focusing on a number of niche in this band provide a starting point for earning markets and, in parallel, invest in human and foreign exchange. However, Tanzania’s current markets and, in parallel, invest in human and foreign exchange. However, Tanzania’s current knowledge capital to develop a competitive service model of competition hinges on comparative knowledge capital to develop a competitive service model of competition hinges on comparative sector. Tanzania’s current situation, where the small advantages. Exporting unprocessed crops, such sector. Tanzania’s current situation, where the small advantages. Exporting unprocessed crops, such level of exports is divided among minerals and final as the high volume of cashew shipped to India level of exports is divided among minerals and final as the high volume of cashew shipped to India consumption goods and where no cluster now exist for value addition, prevents Tanzania from cap- consumption goods and where no cluster now exist for value addition, prevents Tanzania from cap- in the middle band, helps to create the need for a turing more than a small percentage of the in the middle band, helps to create the need for a turing more than a small percentage of the clear national growth and competitiveness strategy. cashew’s potential value. Through forward inte- clear national growth and competitiveness strategy. cashew’s potential value. Through forward integration and investment in higher value products, gration and investment in higher value products, 2.3.2 Broad Economic Performance Tanzanian firms can increase export revenue. 2.3.2 Broad Economic Performance Tanzanian firms can increase export revenue. and Trade Statistics This transition is beginning to happen in the and Trade Statistics This transition is beginning to happen in the coffee industry, where a shift towards premium coffee industry, where a shift towards premium A deeper analysis of trade statistics allows us to A deeper analysis of trade statistics allows us to coffee, branded products and a focus on serving coffee, branded products and a focus on serving delineate the broad economic and export patterns delineate the broad economic and export patterns more demanding, higher-paying customer seg- more demanding, higher-paying customer seg- that emerge across Tanzania’s existing manufactur- that emerge across Tanzania’s existing manufactur- ments rewards coffee farmers and processors ments rewards coffee farmers and processors ing clusters. The analysis also provides insight into ing clusters. The analysis also provides insight into with increased profits. with increased profits. the evolution of an economy towards higher levels the evolution of an economy towards higher levels of productivity and value-added products. As a of productivity and value-added products. As a starting point, Tanzania has a trade balance of US$ 2.3.3 Regional Trade Statistics starting point, Tanzania has a trade balance of US$ 2.3.3 Regional Trade Statistics –608.7 million.21 Its export receipts are very small Tanzania currently participates in two major –608.7 million.21 Its export receipts are very small Tanzania currently participates in two major relative to the overall economy, equaling just regional trade schemes: the East African relative to the overall economy, equaling just regional trade schemes: the East African 12.7% of GDP.22 Community (EAC) and the Southern Africa 12.7% of GDP.22 Community (EAC) and the Southern Africa Development Community (SADC). The EAC Development Community (SADC). The EAC There are two broad export patterns emerging in partnership was built in 2000 between Tanzania, There are two broad export patterns emerging in partnership was built in 2000 between Tanzania, Tanzania. See Figure 5. Both of these patterns are Uganda and Kenya, with the intent of furthering Tanzania. See Figure 5. Both of these patterns are Uganda and Kenya, with the intent of furthering alarming and underscore the urgency for Tanzania regional integration. However, intra EAC trade is alarming and underscore the urgency for Tanzania regional integration. However, intra EAC trade is to evolve its economy. still low. Both Uganda and Kenya accounted for to evolve its economy. still low. Both Uganda and Kenya accounted for less than 9% of Tanzania’s exports in 2003, with less than 9% of Tanzania’s exports in 2003, with ■ Increasing reliance on extractive, upstream indus- Ugandan trade making up less than 1% of this ■ Increasing reliance on extractive, upstream indus- Ugandan trade making up less than 1% of this tries. Tanzania increasingly exports resources total.23 Imports to Tanzania from its EAC partners tries. Tanzania increasingly exports resources total.23 Imports to Tanzania from its EAC partners almost directly from the ground with very limited accounted for less than 6% of total imports in the almost directly from the ground with very limited accounted for less than 6% of total imports in the processing or value added. The increase in this same year. processing or value added. The increase in this same year. band is due to mining exports which have band is due to mining exports which have increased dramatically over recent years due to Likewise, trade with other African nations outside increased dramatically over recent years due to Likewise, trade with other African nations outside a liberalization of policy by the GOT. Foreign of the EAC has been meager. Trade with South a liberalization of policy by the GOT. Foreign of the EAC has been meager. Trade with South investment has poured into the country as firms Africa, Tanzania’s most important trade partner in investment has poured into the country as firms Africa, Tanzania’s most important trade partner in capitalize on Tanzania’s rich mineral deposits, SADC, offers a revealing example. In 2003, capitalize on Tanzania’s rich mineral deposits, SADC, offers a revealing example. In 2003, especially gold. The government had benefited Tanzania was exporting slightly more than 3% of especially gold. The government had benefited Tanzania was exporting slightly more than 3% of

20 Porter, Michael, 1990 20 Porter, Michael, 1990 21 Bank of Tanzania, Economic Bulletin 21 Bank of Tanzania, Economic Bulletin 22 The Economist Intelligence Unit, Country Report: Tanzania. London, UK. February 2005 22 The Economist Intelligence Unit, Country Report: Tanzania. London, UK. February 2005 23 IMF Country Report No.04/284. P. 69, 72 23 IMF Country Report No.04/284. P. 69, 72

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TABLE 1. Tanzania: destination of exports and imports, 2000–2003 TABLE 1. Tanzania: destination of exports and imports, 2000–2003 (% of total exports) (% of total exports)

Exports Imports Exports Imports 2000 2001 2002 2003 2000 2001 2002 2003 2000 2001 2002 2003 2000 2001 2002 2003 European Union 54.4 56.1 53.1 56.7 22.6 23.1 22.0 19.7 European Union 54.4 56.1 53.1 56.7 22.6 23.1 22.0 19.7

United Kingdom 22.0 18.3 18.1 33.9 7.0 7.4 5.7 5.0 United Kingdom 22.0 18.3 18.1 33.9 7.0 7.4 5.7 5.0

Germany 9.9 5.0 3.1 2.7 3.4 3.9 3.6 3.2 Germany 9.9 5.0 3.1 2.7 3.4 3.9 3.6 3.2

Netherlands 6.9 6.7 6.0 6.0 1.9 1.8 1.6 1.5 Netherlands 6.9 6.7 6.0 6.0 1.9 1.8 1.6 1.5

Belgium 2.8 1.4 2.4 3.1 1.0 1.3 1.4 1.5 Belgium 2.8 1.4 2.4 3.1 1.0 1.3 1.4 1.5

Italy 1.3 1.0 2.7 2.1 2.3 2.9 2.7 1.8 Italy 1.3 1.0 2.7 2.1 2.3 2.9 2.7 1.8

Other EU 11.4 23.7 20.8 8.9 7.0 5.8 7.0 6.7 Other EU 11.4 23.7 20.8 8.9 7.0 5.8 7.0 6.7

United States 2.3 2.0 1.5 1.0 3.9 3.8 5.5 3.2 United States 2.3 2.0 1.5 1.0 3.9 3.8 5.5 3.2

Japan 5.1 8.9 10.8 7.8 9.3 8.7 8.3 7.8 Japan 5.1 8.9 10.8 7.8 9.3 8.7 8.3 7.8

India 14.8 10.7 7.2 6.2 5.8 5.1 6.4 7.7 India 14.8 10.7 7.2 6.2 5.8 5.1 6.4 7.7

China (inc.Hong Kong) 1.4 0.1 1.3 1.2 4.8 4.1 5.2 5.8 China (inc.Hong Kong) 1.4 0.1 1.3 1.2 4.8 4.1 5.2 5.8

Singapore 1.0 0.8 0.4 1.2 0.4 0.5 0.3 0.8 Singapore 1.0 0.8 0.4 1.2 0.4 0.5 0.3 0.8

Kenya 4.8 5.0 4.0 7.0 6.1 5.6 5.7 5.3 Kenya 4.8 5.0 4.0 7.0 6.1 5.6 5.7 5.3

Uganda 1.3 0.7 0.6 1.0 0.4 0.7 0.2 0.4 Uganda 1.3 0.7 0.6 1.0 0.4 0.7 0.2 0.4

South Africa 1.8 1.1 1.9 3.3 11.5 11.8 11.3 14.1 South Africa 1.8 1.1 1.9 3.3 11.5 11.8 11.3 14.1

Zambia 0.7 0.7 2.0 1.6 0.2 0.1 0.3 0.1 Zambia 0.7 0.7 2.0 1.6 0.2 0.1 0.3 0.1

Zimbabwe 4.3 0.1 0.2 0.4 0.3 0.2 0.1 0.1 Zimbabwe 4.3 0.1 0.2 0.4 0.3 0.2 0.1 0.1

Other 8.1 13.9 17.0 12.6 34.8 36.6 34.7 35.0 Other 8.1 13.9 17.0 12.6 34.8 36.6 34.7 35.0

Total 100 100 100 100 100 100 100 100 Total 100 100 100 100 100 100 100 100

Source: IMF Country Report 2004 (from Tanzanian Authorities) Source: IMF Country Report 2004 (from Tanzanian Authorities)

its total exports to South Africa, while imports were efforts to further this process continue to face its total exports to South Africa, while imports were efforts to further this process continue to face close to 14%.24 Comparing these numbers to the obstacles. The first problem is the homogeneity close to 14%.24 Comparing these numbers to the obstacles. The first problem is the homogeneity magnitude of inter regional trade with the EU and of products, especially between EAC countries. magnitude of inter regional trade with the EU and of products, especially between EAC countries. other non-African countries—exports to the EU Tanzania, Kenya and Uganda produce similar other non-African countries—exports to the EU Tanzania, Kenya and Uganda produce similar amounted to 56.7% of total exports, while imports goods particularly primary agricultural goods, amounted to 56.7% of total exports, while imports goods particularly primary agricultural goods, were 19.7% of total imports in 2003—it becomes including coffee, tea, cotton and fish. This lack of were 19.7% of total imports in 2003—it becomes including coffee, tea, cotton and fish. This lack of clear that progress in this realm has been restrained. product differentiation makes trade less attractive clear that progress in this realm has been restrained. product differentiation makes trade less attractive See Table 1. between neighbors, and is further evidence of the See Table 1. between neighbors, and is further evidence of the need to produce higher-quality products that are need to produce higher-quality products that are Although intra-regional trade and integration are not only competitive within the region, but also on Although intra-regional trade and integration are not only competitive within the region, but also on seen as potential drivers of growth for Tanzania, world markets. In pursuit of this goal, one approach seen as potential drivers of growth for Tanzania, world markets. In pursuit of this goal, one approach

24 Ibid. P.69, 72 24 Ibid. P.69, 72

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would be a regional effort to increase competitive- Kenya (another EAC member) reported delays in would be a regional effort to increase competitive- Kenya (another EAC member) reported delays in ness in world markets, which is more likely to suc- imports and exports of 7 and 4 days respectively, in ness in world markets, which is more likely to suc- imports and exports of 7 and 4 days respectively, in ceed than promoting each country individually in Tanzania, enterprises that engaged in foreign trade ceed than promoting each country individually in Tanzania, enterprises that engaged in foreign trade the market. said delays were on average 14 days for imports and the market. said delays were on average 14 days for imports and 7 days for exports. 7 days for exports. Another factor that affects not only the extent of Another factor that affects not only the extent of regional trade, but also trade in world markets is the The GDP and export data confirm the diagnosis: regional trade, but also trade in world markets is the The GDP and export data confirm the diagnosis: existence of non-tariff barriers. Exporting and Tanzania must be prepared to take deliberate existence of non-tariff barriers. Exporting and Tanzania must be prepared to take deliberate importing from Tanzania is hampered by, among actions to change its economic course in order to importing from Tanzania is hampered by, among actions to change its economic course in order to other things (i) health certificates for agricultural achieve broad growth and increased competitive- other things (i) health certificates for agricultural achieve broad growth and increased competitive- commodities; (ii) bureaucratic export procedures; ness. The following section explores a way for commodities; (ii) bureaucratic export procedures; ness. The following section explores a way for (iii) time consuming customs clearance; and (iv) lack Tanzania to begin this process. This section is (iii) time consuming customs clearance; and (iv) lack Tanzania to begin this process. This section is of transportation and logistical infrastructure.25 focused on the theory of competitiveness, grounded of transportation and logistical infrastructure.25 focused on the theory of competitiveness, grounded Although these are many of the challenges faced by in Tanzania’s specific experience. Its goal is to out- Although these are many of the challenges faced by in Tanzania’s specific experience. Its goal is to out- other African nations in furthering their trade ties line a development path that Tanzania can use as a other African nations in furthering their trade ties line a development path that Tanzania can use as a with world markets, the situation in Tanzania is template going forward. It will highlight the role of with world markets, the situation in Tanzania is template going forward. It will highlight the role of slightly bleaker. Two recent World Bank reports on competitive firms, including SMEs, that are domestic, slightly bleaker. Two recent World Bank reports on competitive firms, including SMEs, that are domestic, the country’s investment climate place Tanzania on regionally and internationally focused, and will the country’s investment climate place Tanzania on regionally and internationally focused, and will the lower end of the scale in terms of ports and cus- show how adopting this model can increase the the lower end of the scale in terms of ports and cus- show how adopting this model can increase the toms delays.26 For instance, while companies in prosperity of the average Tanzanian citizen. toms delays.26 For instance, while companies in prosperity of the average Tanzanian citizen.

25 Refer to “Doing Business in 2005 and Investment Climate Assessment: Improving Enterprise Performance and Growth in Tanzania” 2004. World Bank 25 Refer to “Doing Business in 2005 and Investment Climate Assessment: Improving Enterprise Performance and Growth in Tanzania” 2004. World Bank Publications. Publications. 26 Ibid 26 Ibid

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from paternalism and plays the role of partner to the from paternalism and plays the role of partner to the 3 TANZANIA’S government in the success of the economy. 3 TANZANIA’S government in the success of the economy. Second, historians will note that the building Second, historians will note that the building TRANSITION blocks of the economy–the tools that enable the TRANSITION blocks of the economy–the tools that enable the country to prosper - become more complex. No country to prosper - become more complex. No TO ECONOMIC longer will mineral deposits, cheap labor, or good TO ECONOMIC longer will mineral deposits, cheap labor, or good roads define the economic opportunities of roads define the economic opportunities of Tanzania. In the future, the quality of the legal sys- Tanzania. In the future, the quality of the legal sys- GROWTH AND tem, the quality of skilled employees, and the tech- GROWTH AND tem, the quality of skilled employees, and the technology that allows Tanzania to communicate with nology that allows Tanzania to communicate with A COMPETITIVE customers and suppliers around the world will A COMPETITIVE customers and suppliers around the world will ECONOMY drive prosperity. ECONOMY drive prosperity. Lastly, and driven by the first two changes, histori- Lastly, and driven by the first two changes, historians will see that the products that Tanzania creates ans will see that the products that Tanzania creates have fundamentally changed. Whereas in the past have fundamentally changed. Whereas in the past The transition from an economy that creates com- Tanzania produced commodity products as cheaply The transition from an economy that creates com- Tanzania produced commodity products as cheaply modity, low value products to one which responds as possible for sale to the highest bidder, in the modity, low value products to one which responds as possible for sale to the highest bidder, in the to market conditions and innovates to produce future, products will embed unique knowledge to market conditions and innovates to produce future, products will embed unique knowledge high value, complex goods and services is an intri- about specific customer needs and preferences for high value, complex goods and services is an intri- about specific customer needs and preferences for cate and dynamic process. However, if we were to which discerning buyers will pay a premium. cate and dynamic process. However, if we were to which discerning buyers will pay a premium. imagine that in 50 years, Ph.D. candidates in eco- imagine that in 50 years, Ph.D. candidates in eco- nomics at the University of Dar es Salaam will Figure 6, shows this potential transition. This path nomics at the University of Dar es Salaam will Figure 6, shows this potential transition. This path study the evolution of Tanzania from a Heavily is not deterministic; in fact, most countries have study the evolution of Tanzania from a Heavily is not deterministic; in fact, most countries have Indebted Poor Country (HIPC) state to a prosper- not made such a transition and other paths have Indebted Poor Country (HIPC) state to a prosper- not made such a transition and other paths have ous and upper-middle income country, they will been followed. However, this is the path that most ous and upper-middle income country, they will been followed. However, this is the path that most see three significant changes. closely aligns with Tanzania’s current possibilities see three significant changes. closely aligns with Tanzania’s current possibilities and future prospects. In this section, we introduce and future prospects. In this section, we introduce First, they will note the changing roles of the govern- these concepts and highlight the primary areas on First, they will note the changing roles of the govern- these concepts and highlight the primary areas on ment and private sector, as the government moves which Tanzania should focus to create the condi- ment and private sector, as the government moves which Tanzania should focus to create the condi- from player to referee, and the private sector emerges tions for this complex change process. from player to referee, and the private sector emerges tions for this complex change process.

FIGURE 6. THE EVOLUTION OF A DEVELOPING ECONOMY FIGURE 6. THE EVOLUTION OF A DEVELOPING ECONOMY

Private Sector Private Sector Leadership Build a platform for core processes • Choosing customers and and products

markets Economic Leadership • Defining distribution channels • Investing in Sell employees products

• Stable macroeconomic environment Exploit raw Rule of law • materials • Allocation of resources and cheap Government goods Leadership

Government Raw Materials Intermediate Sophisticated or Cheap Labor Goods Products

Ability of the Economy to Sustain Complex Relationships

Physical Capital Social Capital

Developing countries must invest rents from selling physical capital in creating the higher forms of social capital required to develop and sustain a complex economy

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3.1 PROSPERITY: increasing investment in higher forms of capital, have 3.1 PROSPERITY: increasing investment in higher forms of capital, have the ability to create a more complex, secure and sus- the ability to create a more complex, secure and sus- GOVERNMENTS ENABLE IT; tainable economy. Ideally, the government begins to GOVERNMENTS ENABLE IT; tainable economy. Ideally, the government begins to FIRMS CREATE IT craft policy and regulation that creates an enabling FIRMS CREATE IT craft policy and regulation that creates an enabling environment for business, offering tactical support environment for business, offering tactical support The experience of developed economies such as the without impeding competition. Without this transi- The experience of developed economies such as the without impeding competition. Without this transi- United States, Canada and the nations of Western tion of leadership to guide the growth of the econo- United States, Canada and the nations of Western tion of leadership to guide the growth of the econo- Europe maps to clear trends in the interactions of my, the forces of paternalism and protectionism can Europe maps to clear trends in the interactions of my, the forces of paternalism and protectionism can market dynamics and economic players over time. undermine the economy’s ability to move beyond market dynamics and economic players over time. undermine the economy’s ability to move beyond Their pattern informs this model and offers one simple exports to complex goods—goods that can Their pattern informs this model and offers one simple exports to complex goods—goods that can possible trajectory for development. Increasing sustain an economy without decapitalizing natural possible trajectory for development. Increasing sustain an economy without decapitalizing natural globalization and the attendant shift towards a resources or exploiting low-cost labor. globalization and the attendant shift towards a resources or exploiting low-cost labor. knowledge-based economy have made manufactur- knowledge-based economy have made manufacturing-led growth, typified by the experience of This pattern shows up clearly in Tanzania’s developing-led growth, typified by the experience of This pattern shows up clearly in Tanzania’s develop- Singapore and Asian “tiger” countries, reliant on an ment, which followed a socialist model from the Singapore and Asian “tiger” countries, reliant on an ment, which followed a socialist model from the abundance of low-cost labor. A country that seeks mid-1960s to the mid-1990s. During this period abundance of low-cost labor. A country that seeks mid-1960s to the mid-1990s. During this period to develop within these current dynamics must the agricultural sector was dominated by collec- to develop within these current dynamics must the agricultural sector was dominated by collec- capitalize on its existing natural and comparative tives, as in other socialist countries. The GOT has capitalize on its existing natural and comparative tives, as in other socialist countries. The GOT has advantages, but must also use competitive strategy made some of the necessary steps over the past ten advantages, but must also use competitive strategy made some of the necessary steps over the past ten to innovate, create products of greater value, and years to provide the private sector with a stable to innovate, create products of greater value, and years to provide the private sector with a stable remain flexible enough to respond to changes in the macroeconomic environment, including low rates remain flexible enough to respond to changes in the macroeconomic environment, including low rates global marketplace. This model can serve as a guide of inflation, appropriate regulatory regimes, and global marketplace. This model can serve as a guide of inflation, appropriate regulatory regimes, and for Tanzania, which possesses a wealth of resources, transparent governance. The government’s current for Tanzania, which possesses a wealth of resources, transparent governance. The government’s current but which has failed to successfully use its endow- challenge is to ensure that a vibrant private sector but which has failed to successfully use its endow- challenge is to ensure that a vibrant private sector ments to develop its economy in a significant way. develops over time, to which it can gradually hand ments to develop its economy in a significant way. develops over time, to which it can gradually hand over economic leadership. over economic leadership. In applying this model of economic development In applying this model of economic development to Tanzania, the first area that must be addressed is to Tanzania, the first area that must be addressed is economic leadership. The roles of economic players economic leadership. The roles of economic players generally evolve and become more clearly delineated generally evolve and become more clearly delineated as the countries and economies develop. In an econ- 3.2 THE EVOLUTION FROM as the countries and economies develop. In an econ- 3.2 THE EVOLUTION FROM omy’s nascent stages, when limited capital is focused omy’s nascent stages, when limited capital is focused entirely on natural resources, infrastructure, and BASIC TO COMPLEX entirely on natural resources, infrastructure, and BASIC TO COMPLEX hard currency, the government often plays a com- PRODUCTS hard currency, the government often plays a com- PRODUCTS manding role in allocating limited resources to create manding role in allocating limited resources to create a stable macroeconomic environment, establish a Developing countries that compete on comparative a stable macroeconomic environment, establish a Developing countries that compete on comparative transparent rule of law, and lay the groundwork for a advantage, relying on basic factor advantages such as transparent rule of law, and lay the groundwork for a advantage, relying on basic factor advantages such as private sector. As a result, the government also ends cheap labor and sub-soil assets, tend to export com- private sector. As a result, the government also ends cheap labor and sub-soil assets, tend to export com- up being the most important economic actor, push- modity products. Since competition in these exports up being the most important economic actor, push- modity products. Since competition in these exports ing certain industries and even managing state- is fierce and the products are largely undifferentiat- ing certain industries and even managing state- is fierce and the products are largely undifferentiat- owned enterprises. In this phase, the key objectives ed, countries and firms typically compete on price: owned enterprises. In this phase, the key objectives ed, countries and firms typically compete on price: are peace and stability. The Tanzanian government is the lowest-cost producer becomes the market leader. are peace and stability. The Tanzanian government is the lowest-cost producer becomes the market leader. for the most part still in this nascent phase, although This dynamic is the principal cause of the steady for the most part still in this nascent phase, although This dynamic is the principal cause of the steady trying to move away from its dominant role. decline in real prices of most major commodities trying to move away from its dominant role. decline in real prices of most major commodities over the last 150 years, see Figure 7. In order to over the last 150 years, see Figure 7. In order to As competitive industries emerge and the private keep costs low, producers choose not to invest in As competitive industries emerge and the private keep costs low, producers choose not to invest in sector becomes stronger and less fragmented, the human capital; in contrast, they often pay workers sector becomes stronger and less fragmented, the human capital; in contrast, they often pay workers government should begin handing off economic lead- as little as they can. As a result, competition in basic government should begin handing off economic lead- as little as they can. As a result, competition in basic ership to the private sector. At this point, the govern- products can increase poverty and lead countries ership to the private sector. At this point, the govern- products can increase poverty and lead countries ment’s role needs to shift from being a nurturing par- into a downward spiral of wealth destruction. ment’s role needs to shift from being a nurturing par- into a downward spiral of wealth destruction. ent to being an impartial referee. Figure 6 highlights Sole reliance on comparative advantage is no longer ent to being an impartial referee. Figure 6 highlights Sole reliance on comparative advantage is no longer how the changing roles of leadership, along with the a viable path to prosperity. how the changing roles of leadership, along with the a viable path to prosperity.

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FIGURE 7. DECLINING BASIC COMMODITY PRICES, 1845–1999 FIGURE 7. DECLINING BASIC COMMODITY PRICES, 1845–1999

Tanzania’s trade statistics clearly place the economy Why have some countries succeeded at moving Tanzania’s trade statistics clearly place the economy Why have some countries succeeded at moving on the low end of the “Ability of the Economy to beyond their agricultural roots to produce complex on the low end of the “Ability of the Economy to beyond their agricultural roots to produce complex Sustain Complex Relationships” axis, as Tanzania goods and services, while others have stagnated in Sustain Complex Relationships” axis, as Tanzania goods and services, while others have stagnated in competes primarily on comparative advantage, tra- an agricultural export economy—or worse, slid competes primarily on comparative advantage, tra- an agricultural export economy—or worse, slid ditionally relying on basic natural resources, abun- into a subsistence farming economy? To put it in ditionally relying on basic natural resources, abun- into a subsistence farming economy? To put it in dant factor inputs and cheap labor. Figure 8 shows stark terms, countries have a choice between strategy dant factor inputs and cheap labor. Figure 8 shows stark terms, countries have a choice between strategy that Tanzania’s exports in agricultural products have and poverty. When firms and industry clusters have that Tanzania’s exports in agricultural products have and poverty. When firms and industry clusters have stagnated, partly due to the relatively little value strategies, they can embed their products with stagnated, partly due to the relatively little value strategies, they can embed their products with added to them. Mining is an anomaly, which has unique insights about customer needs that will be added to them. Mining is an anomaly, which has unique insights about customer needs that will be grown due to investments from foreign companies rewarded by the market, thereby lifting them out of grown due to investments from foreign companies rewarded by the market, thereby lifting them out of exporting unprocessed minerals. the commodity trap. Countries with strategies earn exporting unprocessed minerals. the commodity trap. Countries with strategies earn the choice to participate in the Virtuous Cycle the choice to participate in the Virtuous Cycle described in Figure 9, taking the rents they capture described in Figure 9, taking the rents they capture from their natural resources and low-wage labor from their natural resources and low-wage labor FIGURE 8. TANZANIA EXPORTS and investing those rents in building social capital FIGURE 8. TANZANIA EXPORTS and investing those rents in building social capital

600

500 FIGURE 9. THE VIRTUOUS CYCLE FIGURE 9. THE VIRTUOUS CYCLE

400 How Does Wealth Actually Get Created?

300 Wealth for the Economic Growth Social Equity Nation US$ million, FOB 200

100 Capacity to Export Investment in Higher Complex Products Forms of Capital 0 1999 2000 2001 2002 2003

Minerals Cashew Nuts Coffee Sustainability Productivity Manufactured Goods Tobacco Cotton Innovation Tea

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in the form of educational institutions and also allow local customers to enjoy higher disposable in the form of educational institutions and also allow local customers to enjoy higher disposable improved governance. Over time, these institutions incomes and their demand for higher quality goods improved governance. Over time, these institutions incomes and their demand for higher quality goods can support a higher skilled workforce that can and services increases, impacting local retailers and can support a higher skilled workforce that can and services increases, impacting local retailers and produce more complex goods, allowing the country other providers of consumption goods. Local SMEs produce more complex goods, allowing the country other providers of consumption goods. Local SMEs to migrate from exploitation to innovation. will benefit from this dynamic if they keep their to migrate from exploitation to innovation. will benefit from this dynamic if they keep their offerings up to the standards of these increasingly offerings up to the standards of these increasingly The central economic goal of any nation is to demanding consumers. Thus, as exporting firms The central economic goal of any nation is to demanding consumers. Thus, as exporting firms attain a high and rising standard of living for all of grow local support SMEs and those throughout the attain a high and rising standard of living for all of grow local support SMEs and those throughout the its citizens. This goal is measured by increased per rest of the economy will benefit also. As discussed its citizens. This goal is measured by increased per rest of the economy will benefit also. As discussed capita income and high-paying, satisfying jobs later, identifying attractive markets, support services, capita income and high-paying, satisfying jobs later, identifying attractive markets, support services, for a large proportion of those who can work. training and access to financing for all of these dif- for a large proportion of those who can work. training and access to financing for all of these dif- Consequently, the pursuit of the central economic ferent types of firms can increase the velocity and Consequently, the pursuit of the central economic ferent types of firms can increase the velocity and goal is driven by productivity, which is based on impact of the cycle. goal is driven by productivity, which is based on impact of the cycle. the nation’s stock of the seven forms of capital: cul- the nation’s stock of the seven forms of capital: cul- tural, human, knowledge, institutional, financial, tural, human, knowledge, institutional, financial, man-made, and natural endowments. Increasingly, 3.2.2 Competitiveness and Poverty man-made, and natural endowments. Increasingly, 3.2.2 Competitiveness and Poverty growing economies rely heavily on forms of capital Alleviation growing economies rely heavily on forms of capital Alleviation that can encourage innovation in human capital. In the past, because people were not the primary that can encourage innovation in human capital. In the past, because people were not the primary Tanzania must invest in its knowledge base to sus- source of a nation’s wealth, societies had to make Tanzania must invest in its knowledge base to sus- source of a nation’s wealth, societies had to make tain a more complex economy. tradeoffs between economic growth and social equity, tain a more complex economy. tradeoffs between economic growth and social equity, with government playing a large role in determining with government playing a large role in determining 3.2.1 The Role of SMEs the distribution of wealth. Because highly productive 3.2.1 The Role of SMEs the distribution of wealth. Because highly productive Firms–not governments—create prosperity through and well-compensated people are at the center of the Firms–not governments—create prosperity through and well-compensated people are at the center of the a combination of strategic choices and operational new model of wealth creation, competitive advantage a combination of strategic choices and operational new model of wealth creation, competitive advantage efficiency. Competitive firms make better choices societies can look forward to making economic efficiency. Competitive firms make better choices societies can look forward to making economic about which customers to serve and which goods growth and social equity complementary, with the about which customers to serve and which goods growth and social equity complementary, with the and services to offer them. They also become more private sector naturally working as the primary mech- and services to offer them. They also become more private sector naturally working as the primary mech- efficient in how they combine people and other anism for allocating wealth and alleviating poverty. efficient in how they combine people and other anism for allocating wealth and alleviating poverty. resources to deliver value to customers. As firms resources to deliver value to customers. As firms become increasingly competitive, not only do they The greatest benefit to the economy of Tanzania will become increasingly competitive, not only do they The greatest benefit to the economy of Tanzania will pay higher wages, but they must also invest in the come from home-based companies that understand pay higher wages, but they must also invest in the come from home-based companies that understand skills of their employees, which drives an increasing this dynamic, particularly SMEs. A company’s home skills of their employees, which drives an increasing this dynamic, particularly SMEs. A company’s home standard of living for the general population. The base is the place where strategy is determined, where standard of living for the general population. The base is the place where strategy is determined, where majority of businesses in Tanzania and many other core product and process technologies are created and majority of businesses in Tanzania and many other core product and process technologies are created and countries are SMEs, which means that SMEs must maintained, where essential skills reside, and where countries are SMEs, which means that SMEs must maintained, where essential skills reside, and where also be able to increase productivity and execute some piece of sophisticated production takes place. It also be able to increase productivity and execute some piece of sophisticated production takes place. It competitive strategies. is the place where the most productive jobs are typi- competitive strategies. is the place where the most productive jobs are typically based, and where the beneficial spillovers to cally based, and where the beneficial spillovers to By seizing opportunities in both export and domes- other parts of the economy are the greatest By seizing opportunities in both export and domes- other parts of the economy are the greatest tic markets, SMEs play a key role in increasing the tic markets, SMEs play a key role in increasing the purchasing power of the local population. To serve With the emergence of competitive firms and purchasing power of the local population. To serve With the emergence of competitive firms and demanding customers in export markets, firms can industries, not only will demand for higher-skilled demanding customers in export markets, firms can industries, not only will demand for higher-skilled only prosper through the sale of quality goods and labor increase, generating an increase in wages, but only prosper through the sale of quality goods and labor increase, generating an increase in wages, but services developed by well-paid, creative employees. there will also be more jobs and economic opportu- services developed by well-paid, creative employees. there will also be more jobs and economic opportu- The same holds true for SMEs that supply these nity. Increasing employment levels is critical in The same holds true for SMEs that supply these nity. Increasing employment levels is critical in exporting firms. They must also perform at the Tanzania, with an unemployment rate of 12.9% in exporting firms. They must also perform at the Tanzania, with an unemployment rate of 12.9% in highest quality level in supplying components or 2000/1, reflecting a recent doubling in the number highest quality level in supplying components or 2000/1, reflecting a recent doubling in the number delivering services. This dynamic creates the need of unemployed persons, from 405,722 in 1990/91 delivering services. This dynamic creates the need of unemployed persons, from 405,722 in 1990/91 for business skills and innovation. Increased exports to 912,772 in 2000/01.27 for business skills and innovation. Increased exports to 912,772 in 2000/01.27

27 Integrated Labour Force Survey 2000/2001, Ministry of Labour, Youth Development and Sports and the National Bureau of Statistics, The United Republic 27 Integrated Labour Force Survey 2000/2001, Ministry of Labour, Youth Development and Sports and the National Bureau of Statistics, The United Republic of Tanzania of Tanzania

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FIGURE 10. LABOR FORCE VS. GDP COMPOSITION 2001 (%) FIGURE 10. LABOR FORCE VS. GDP COMPOSITION 2001 (%)

Electricity & 100% Water 90% Financial & Business Services 80% Mining & 70% Quarrying 60% Transport & 50% Communications 40% Construction 30% Manufacturing 20% Other Services 10% Agriculture, Forestry & Fishing 0% % GDP % Total Employment

Increasing employment in the same sectors where sectors to spur innovation and create sustained Increasing employment in the same sectors where sectors to spur innovation and create sustained Tanzania has been competing for the past few growth. In doing so, support should be extended to Tanzania has been competing for the past few growth. In doing so, support should be extended to decades, however, will not be enough. The current the SMEs in these sectors that show early signs of decades, however, will not be enough. The current the SMEs in these sectors that show early signs of economic composition of the country and its labor success. These firms, in particular, will be in a posi- economic composition of the country and its labor success. These firms, in particular, will be in a posi- force allocation are major obstacles to creating the tion to create economic opportunities for a new, force allocation are major obstacles to creating the tion to create economic opportunities for a new, economic transformation that Tanzania needs. As more highly skilled labor force. economic transformation that Tanzania needs. As more highly skilled labor force. depicted in Figure 10, more than 80% of the coun- depicted in Figure 10, more than 80% of the country’s labor force is employed in the agricultural sec- try’s labor force is employed in the agricultural sector, which accounts for 45% of total GDP. The tor, which accounts for 45% of total GDP. The manufacturing sector, in contrast, employs a bit manufacturing sector, in contrast, employs a bit more than 1% of the labor force, but generates 3.3 CREATING A more than 1% of the labor force, but generates 3.3 CREATING A more than 7% of GDP. COMPETITIVENESS MINDSET more than 7% of GDP. COMPETITIVENESS MINDSET

Two things emerge from this analysis: first, it high- Broad economic change cannot happen in the Two things emerge from this analysis: first, it high- Broad economic change cannot happen in the lights a highly inefficient agricultural sector based absence of broad commitment. People, sectors, lights a highly inefficient agricultural sector based absence of broad commitment. People, sectors, on subsistence farming that is in urgent need of nations, and societies have relied on comparative on subsistence farming that is in urgent need of nations, and societies have relied on comparative change before people can participate in more pro- advantage for centuries, if not longer. For many, change before people can participate in more pro- advantage for centuries, if not longer. For many, ductive employment. For this change process to the principles of competitiveness are at best foreign, ductive employment. For this change process to the principles of competitiveness are at best foreign, begin, Tanzania must launch a serious campaign to and at worst, threatening to traditional business begin, Tanzania must launch a serious campaign to and at worst, threatening to traditional business engage SMEs in the agribusiness sector in a process thinking and strategy. To complete the transforma- engage SMEs in the agribusiness sector in a process thinking and strategy. To complete the transforma- of product upgrading. Current agricultural prac- tion to a truly competitive economy, individuals of product upgrading. Current agricultural prac- tion to a truly competitive economy, individuals tices are more labor-based than capital-based in must learn to think competitively, understanding tices are more labor-based than capital-based in must learn to think competitively, understanding comparison to other sectors. Moving from subsis- the principles that drive global competition and comparison to other sectors. Moving from subsis- the principles that drive global competition and tence to cash crops will require the adoption of increasing their receptivity to innovation and tence to cash crops will require the adoption of increasing their receptivity to innovation and new techniques and technologies that will improve change. But this is not an easy shift; in fact, creat- new techniques and technologies that will improve change. But this is not an easy shift; in fact, creat- yields. This shift would represent value accruing ing a culture of competitiveness can be the most yields. This shift would represent value accruing ing a culture of competitiveness can be the most not only to the Tanzanian economy, but also to the difficult part of the journey. not only to the Tanzanian economy, but also to the difficult part of the journey. majority of Tanzania’s labor force. majority of Tanzania’s labor force. This change process typically begins with entrepre- This change process typically begins with entrepre- The second key finding from this analysis is that as neurs, firms, industries and government officials The second key finding from this analysis is that as neurs, firms, industries and government officials the agribusiness sector moves up the value chain, committing to the idea that competitiveness is a the agribusiness sector moves up the value chain, committing to the idea that competitiveness is a Tanzania must begin looking to more productive path to sustainable growth. As they test competitive Tanzania must begin looking to more productive path to sustainable growth. As they test competitive

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strategies in their businesses and policies, gradually diffuse a better understanding of competitiveness. strategies in their businesses and policies, gradually diffuse a better understanding of competitiveness. the evolutionary process begins for the country’s These campaigns often focus on celebrating entre- the evolutionary process begins for the country’s These campaigns often focus on celebrating entre- economy. Making mental models explicit, which are preneurs and innovators, disseminating principles economy. Making mental models explicit, which are preneurs and innovators, disseminating principles the beliefs, customs and values of a society, is a of competitiveness along with concrete examples of the beliefs, customs and values of a society, is a of competitiveness along with concrete examples of helpful starting point for government leaders. successful businesses executing competitive strate- helpful starting point for government leaders. successful businesses executing competitive strate- Culture is such a significant component of econom- gies. These types of campaigns, supplemented with Culture is such a significant component of econom- gies. These types of campaigns, supplemented with ic development that without understanding the training forums on competitive strategy, with key ic development that without understanding the training forums on competitive strategy, with key beliefs and values that inform the actions of eco- players from the public and private sector can also beliefs and values that inform the actions of eco- players from the public and private sector can also nomic players, change can be virtually impossible. prove helpful. As businesses and government nomic players, change can be virtually impossible. prove helpful. As businesses and government embrace competitiveness, communicating the embrace competitiveness, communicating the A communications campaign to engage economic impact of successful, data-driven strategies helps to A communications campaign to engage economic impact of successful, data-driven strategies helps to actors on their ideas and assumptions can help to create an environment that is receptive to change. actors on their ideas and assumptions can help to create an environment that is receptive to change.

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adoption of tools and services. Achieving success adoption of tools and services. Achieving success 4 ICT AND requires the tactical usage of ICT to inform strategy 4 ICT AND requires the tactical usage of ICT to inform strategy and improve productivity. If funds are invested in and improve productivity. If funds are invested in ICT to drive adoption without demonstrable ICT to drive adoption without demonstrable BUILDING returns in productivity and efficiency, countries will BUILDING returns in productivity and efficiency, countries will fall further behind, and future investments in ICT fall further behind, and future investments in ICT COMPETITIVENESS will be harder to justify in light of a negative track- COMPETITIVENESS will be harder to justify in light of a negative track- record. When seeking to invest ICT resources in record. When seeking to invest ICT resources in a promising industry or firm opportunity, three a promising industry or firm opportunity, three inputs to success must be considered, illustrated inputs to success must be considered, illustrated ICT has a critical role to play in the transition to a ICT has a critical role to play in the transition to a further in Figure 11: further in Figure 11: more developed economy. As an economy shifts more developed economy. As an economy shifts ■ Access: Does the recipient organization have the ■ Access: Does the recipient organization have the from industries focused on exporting raw materials from industries focused on exporting raw materials infrastructure to use the proposed ICT? Factors infrastructure to use the proposed ICT? Factors to more complex, value-added industries, demand to more complex, value-added industries, demand that affect access are availability of services such that affect access are availability of services such for ICT products and services grows. ICT improves for ICT products and services grows. ICT improves as electricity, telephone, cellular and satellite. as electricity, telephone, cellular and satellite. firms’ ability to communicate with customers, facil- firms’ ability to communicate with customers, facil- ■ Ability: Do the intended beneficiaries have the ■ Ability: Do the intended beneficiaries have the itating upgrades in their competitive positioning. It itating upgrades in their competitive positioning. It skill set and resources to leverage the technology? skill set and resources to leverage the technology? can also help to improve logistics, increase trans- can also help to improve logistics, increase trans- Willingness of the organization to pay for ICT Willingness of the organization to pay for ICT parency and make geographic distance irrelevant in parency and make geographic distance irrelevant in services is an ability factor, as is the level of edu- services is an ability factor, as is the level of edu- transactions. ICT is an essential tool in the evolu- transactions. ICT is an essential tool in the evolu- cation and technology training of an organiza- cation and technology training of an organization of a developing economy, but its value is tion of a developing economy, but its value is tion’s employees. In Tanzania, ability is highly tion’s employees. In Tanzania, ability is highly dependent on the growth of competitive firms and dependent on the growth of competitive firms and stratified. Primary schooling is on par with other stratified. Primary schooling is on par with other industries. The benefits of ICT usage for some of industries. The benefits of ICT usage for some of Sub-Saharan African countries, but there is still a Sub-Saharan African countries, but there is still a Tanzania’s key industries will be explored in Section Tanzania’s key industries will be explored in Section lag in secondary enrollment and skilled IT labor. lag in secondary enrollment and skilled IT labor. 5, while this section will focus on the central plat- 5, while this section will focus on the central plat- Most of the decision makers at the top of organi- Most of the decision makers at the top of organi- form issues necessary to realize those benefits. form issues necessary to realize those benefits. zations—both public and private–remain uncon- zations—both public and private–remain unconvinced that significant change is required to vinced that significant change is required to benefit from these technologies. benefit from these technologies. ■ Benefit: Does the project increase the competitive- ■ Benefit: Does the project increase the competitive- 4.1 ACCESS, ABILITY AND ness of the economic actors, even after accounting 4.1 ACCESS, ABILITY AND ness of the economic actors, even after accounting BENEFIT MODEL for project costs? Measuring the impact of ICT BENEFIT MODEL for project costs? Measuring the impact of ICT is not easy. In developed countries, ICT invest- is not easy. In developed countries, ICT invest- The promise of ICT to improve competitiveness ment has been linked clearly to growth in Total The promise of ICT to improve competitiveness ment has been linked clearly to growth in Total cannot be realized simply through a country’s Factor Productivity.28 In developing countries, cannot be realized simply through a country’s Factor Productivity.28 In developing countries,

FIGURE 11. KEYS TO ICT USAGE FIGURE 11. KEYS TO ICT USAGE

Physical access to ICT • Electricity Access • “Dial Tone” – Fixed-line – Mobile Adoption

Individuals ability to use ICT Value of using ICT • Affordability • Productivity • Education • Differentiation/Innovation – Primary/Secondary Government • Quality of Life – Tertiary – Specialized Training Ability Benefit

28 The World Bank’s 2004 “Contribution of Information and Communications Technologies to Growth” by Zhen-Wei Qiang, Pitt A. and Ayers S., analyzed the 28 The World Bank’s 2004 “Contribution of Information and Communications Technologies to Growth” by Zhen-Wei Qiang, Pitt A. and Ayers S., analyzed the impact of technology in Total Factor Productivity in developed economies. Total Factor Productivity is defined as the output growth minus the growth rates impact of technology in Total Factor Productivity in developed economies. Total Factor Productivity is defined as the output growth minus the growth rates

of capital and labor stocks, weightedUsage by their contributions to output. This study has proven the positive results many Western Economies (especially the of capital and labor stocks, weighted by their contributions to output. This study has proven the positive results many Western Economies (especially the US) have accrued from investment in ICT. US) have accrued from investment in ICT.

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FIGURE 12. FIVE LEVELS OF ICT USAGE FIGURE 12. FIVE LEVELS OF ICT USAGE

Non-networked Networked ICT Intensive ICT Non-ICT users CT Only users ICT users users users

Enterprises that Enterprises that Enterprises with Enterprises with Enterprises using make no use of make no use of one or more stand-alone two or more computers and computers, but computers on their computer(s) that internally- have no immediate have access to – premises, but with lack internal networked access to and make regular no network networking, but computers that also telecommunication use of – connections; they which have an have email/Internet services telecommunication will have access to external connectivity. services; telecommunication email/Internet telephone, fax, services. connection cellular

this methodology is difficult to use because infor- understand their true competitive position this methodology is difficult to use because infor- understand their true competitive position mation is not readily available, and ICT use may and adapt to market forces. mation is not readily available, and ICT use may and adapt to market forces. be too limited to effectively track its influence. be too limited to effectively track its influence. However, some indicators can be used to measure Each of the three keys to ICT adoption and usage However, some indicators can be used to measure Each of the three keys to ICT adoption and usage ICT’s impact on competitiveness, at both a firm is necessary for ICT initiatives to succeed, and they ICT’s impact on competitiveness, at both a firm is necessary for ICT initiatives to succeed, and they and institutional level: must be considered simultaneously. This frame- and institutional level: must be considered simultaneously. This frame- 1. Productivity Improvement: Has the use of work is most useful in highlighting the limits of 1. Productivity Improvement: Has the use of work is most useful in highlighting the limits of ICT increased efficiency and/or reduced looking at access and ability metrics in the ICT increased efficiency and/or reduced looking at access and ability metrics in the costs? ICT can be a fundamental tool in absolute. Literacy rates or number of internet users costs? ICT can be a fundamental tool in absolute. Literacy rates or number of internet users improving productivity by facilitating logisti- are negligible inputs into policy prescription if they improving productivity by facilitating logisti- are negligible inputs into policy prescription if they cal improvements through faster and more are not tied to the potential benefits. cal improvements through faster and more are not tied to the potential benefits. efficient communication along the value efficient communication along the value chain. It can also make distance irrelevant, These benefits can vary greatly—as illustrated by the chain. It can also make distance irrelevant, These benefits can vary greatly—as illustrated by the particularly for digitized products and services. five levels of usage model—depending on the industry, particularly for digitized products and services. five levels of usage model—depending on the industry, In a service economy, the ability to provide the position of the user in the value chain, the type of In a service economy, the ability to provide the position of the user in the value chain, the type of faster services in a more customized way is a product and service offered, etc. Not every firm can faster services in a more customized way is a product and service offered, etc. Not every firm can norm of competition, and ICT acts as the use or benefit from the same level of ICT adoption. norm of competition, and ICT acts as the use or benefit from the same level of ICT adoption. platform. Improving transparency through This is the fundamental difference between ICT in platform. Improving transparency through This is the fundamental difference between ICT in the universal availability of information can developing countries, and ICT in developed countries, the universal availability of information can developing countries, and ICT in developed countries, also reduce the cost of doing business and where much of the basic technology is ubiquitous in also reduce the cost of doing business and where much of the basic technology is ubiquitous in strengthen institutions. both business and personal settings. In fact, the specific strengthen institutions. both business and personal settings. In fact, the specific 2. Creating Differentiation: Has the firm/insti- type of ICT usage varies not only based on a firm’s 2. Creating Differentiation: Has the firm/insti- type of ICT usage varies not only based on a firm’s tution used technology to enter new niche sophistication, but also on its role in the value chain. tution used technology to enter new niche sophistication, but also on its role in the value chain. markets, innovate and differentiate its products The optimal intervention for increased usage and pen- markets, innovate and differentiate its products The optimal intervention for increased usage and pen- or processes? Has ICT allowed it to provide a etration of ICT throughout an industry’s value chain or processes? Has ICT allowed it to provide a etration of ICT throughout an industry’s value chain differentiated product to new and more can be characterized according to the Heeks & differentiated product to new and more can be characterized according to the Heeks & profitable global clients? The ability to com- Duncombe’s* model. See Figure 12. profitable global clients? The ability to com- Duncombe’s* model. See Figure 12. municate with customers, faster and more inti- municate with customers, faster and more inti- mately, allows companies to customize their These five levels are not necessarily linear. A firm or mately, allows companies to customize their These five levels are not necessarily linear. A firm or offerings to achieve a competitive edge. ICT industry’s ICT usage could “leap-frog” over intermedi- offerings to achieve a competitive edge. ICT industry’s ICT usage could “leap-frog” over intermedi- also makes information about global competi- ary levels depending on its needs and capabilities. For also makes information about global competi- ary levels depending on its needs and capabilities. For tors and clients available, helping firms to example, as connectivity improves through satellite tors and clients available, helping firms to example, as connectivity improves through satellite

* Adapted from “Information, ICTs and Small Enterprise Findings From Botswana”, Richard Duncombe and Richard Heeks, Institute for Development Policy and * Adapted from “Information, ICTs and Small Enterprise Findings From Botswana”, Richard Duncombe and Richard Heeks, Institute for Development Policy and Management, University of Manchester, Manchester, UK, 1999 Management, University of Manchester, Manchester, UK, 1999

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and backbone networking, a firm formerly in the for Tanzania compared with other African countries. and backbone networking, a firm formerly in the for Tanzania compared with other African countries. “CT Only Users” category could move directly into The Telecommunications sector is also analyzed as “CT Only Users” category could move directly into The Telecommunications sector is also analyzed as “Networked ICT Users”. Yet, every firm and every it is a key determinant in the private sector’s ability “Networked ICT Users”. Yet, every firm and every it is a key determinant in the private sector’s ability link in an industry’s value chain will have distinct ICT to afford and access connectivity. link in an industry’s value chain will have distinct ICT to afford and access connectivity. needs. These levels of usage can be helpful in consid- needs. These levels of usage can be helpful in considering current and potential ICT usage and penetra- On the dimension of access, Tanzania is in a precari- ering current and potential ICT usage and penetra- On the dimension of access, Tanzania is in a precari- tion, and should be weighed simultaneously with ous situation. Fixed and mobile teledensities are some tion, and should be weighed simultaneously with ous situation. Fixed and mobile teledensities are some issues of access, capacity and potential value. These of the lowest in Africa (see Figure 13), even with the issues of access, capacity and potential value. These of the lowest in Africa (see Figure 13), even with the issues are explored further in the following section. increasing use of mobiles compensating somewhat for issues are explored further in the following section. increasing use of mobiles compensating somewhat for the slow growth in fixed-line telephony. From 1997- the slow growth in fixed-line telephony. From 1997- This model explores an essential truth about ICT: 2002 fixed lines grew at a compounded annual rate This model explores an essential truth about ICT: 2002 fixed lines grew at a compounded annual rate although usage correlates highly with improved effi- of 9%, but there was still less than one telephone user although usage correlates highly with improved effi- of 9%, but there was still less than one telephone user ciency and productivity, there is no single level of ICT per 100 inhabitants in the country. Compared to ciency and productivity, there is no single level of ICT per 100 inhabitants in the country. Compared to usage that is appropriate to all institutions in a society. Mauritius or South Africa, which have more than 10 usage that is appropriate to all institutions in a society. Mauritius or South Africa, which have more than 10 For a rural farmer, simply gaining access to a tele- users per 100 inhabitants over the same period, access For a rural farmer, simply gaining access to a tele- users per 100 inhabitants over the same period, access phone may allow a significant leap in productivity. to fixed telephony in Tanzania seems to benefit just a phone may allow a significant leap in productivity. to fixed telephony in Tanzania seems to benefit just a Consider the time and money the farmer could save privileged few. On a relatively positive note, the com- Consider the time and money the farmer could save privileged few. On a relatively positive note, the com- by phoning an agronomist for advice on the proper pound annual growth rate in mobile telephony has by phoning an agronomist for advice on the proper pound annual growth rate in mobile telephony has herbicides to combat a fungus–he saves the time it reached over 100% during the 1997-2002 period, herbicides to combat a fungus–he saves the time it reached over 100% during the 1997-2002 period, takes to travel into town, plus his transport costs. resulting in overall mobile teledensity of almost 2%. takes to travel into town, plus his transport costs. resulting in overall mobile teledensity of almost 2%. Tanzania still runs short on telephone access in rela- Tanzania still runs short on telephone access in rela- At the same time, a bank serving the entire nation tion to other countries in the region, yet most of the At the same time, a bank serving the entire nation tion to other countries in the region, yet most of the may well demand state-of-the-art ICT solutions to projected growth in teledensity is expected to come may well demand state-of-the-art ICT solutions to projected growth in teledensity is expected to come tie together regional branches with real-time infor- from mobile telephony. tie together regional branches with real-time infor- from mobile telephony. mation. In the same way that a bank cannot be mation. In the same way that a bank cannot be most efficient using only telephones, the rural The slow growth in fixed telephony is a result of the most efficient using only telephones, the rural The slow growth in fixed telephony is a result of the farmer would not (and could not) use the manage- telecommunications monopoly and the country’s farmer would not (and could not) use the manage- telecommunications monopoly and the country’s ment information systems to be a better farmer. poor infrastructure capacity. The Tanzania Post and ment information systems to be a better farmer. poor infrastructure capacity. The Tanzania Post and Accurate measurement of the needs and capabilities Telecommunications Corporation (TPTC) used to Accurate measurement of the needs and capabilities Telecommunications Corporation (TPTC) used to of the ICT end users is necessary for ICT to create be the exclusive telecoms and postal services of the ICT end users is necessary for ICT to create be the exclusive telecoms and postal services real economic value in Tanzania. provider up until 1993, when the state monopoly real economic value in Tanzania. provider up until 1993, when the state monopoly was dissolved and replaced by three separate entities: was dissolved and replaced by three separate entities: Just as an economic diagnostic should be done before the Tanzania Telecommunications Company Just as an economic diagnostic should be done before the Tanzania Telecommunications Company identifying barriers to national growth and competi- Limited (TTCL), the Tanzania Postal Corporation identifying barriers to national growth and competi- Limited (TTCL), the Tanzania Postal Corporation tiveness, a comparable process is useful in assessing (TPC) and the Tanzania Communications tiveness, a comparable process is useful in assessing (TPC) and the Tanzania Communications the ICT landscape. The following section offers an Commission (TCC) in charge of overseeing regula- the ICT landscape. The following section offers an Commission (TCC) in charge of overseeing regula- analysis of the current state of ICT in Tanzania, with tion in both sectors. TTCL was privatized in 2001 analysis of the current state of ICT in Tanzania, with tion in both sectors. TTCL was privatized in 2001 particular focus on Tanzanians’ access to ICT and and granted a four-year exclusivity period to meet particular focus on Tanzanians’ access to ICT and and granted a four-year exclusivity period to meet their ability to realize its value. This data will lay the installation targets of at least 800,100 lines by the their ability to realize its value. This data will lay the installation targets of at least 800,100 lines by the groundwork for an evaluation of the current and end of this term in February 2005. The sharehold- groundwork for an evaluation of the current and end of this term in February 2005. The sharehold- potential ICT benefits for the private sector. ing structure was 35% strategic investor potential ICT benefits for the private sector. ing structure was 35% strategic investor (MSI/Detecom), 14% international financial insti- (MSI/Detecom), 14% international financial institutions, 10% local financial institutions, 5% TTCL tutions, 10% local financial institutions, 5% TTCL employees and 36% GOT. MSI/Detecom was employees and 36% GOT. MSI/Detecom was awarded the 35% share at a cost of US$ 120 million, awarded the 35% share at a cost of US$ 120 million, 4.2 ACCESS: MIXED RESULTS of which US$ 60 million was paid and the balance 4.2 ACCESS: MIXED RESULTS of which US$ 60 million was paid and the balance currently disputed in the courts. To date, the rollout currently disputed in the courts. To date, the rollout 4.2.1 Limited Access to Telecom of 800,100 has not been met. Furthermore, there 4.2.1 Limited Access to Telecom of 800,100 has not been met. Furthermore, there and Internet Services have been complaints surrounding the quality of and Internet Services have been complaints surrounding the quality of Low SME and private sector ICT adoption in fixed line telephony. A 2001 report by the Swedish Low SME and private sector ICT adoption in fixed line telephony. A 2001 report by the Swedish Tanzania can in some part be attributed to low International Development Agency (SIDA) Tanzania can in some part be attributed to low International Development Agency (SIDA) access. In this section, we review the state of access highlighted the fact that almost 30% of telephone access. In this section, we review the state of access highlighted the fact that almost 30% of telephone

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FIGURE 13. TELEDENSITY OF FIXED VS. MOBILE TELEPHONY (1997–2002) FIGURE 13. TELEDENSITY OF FIXED VS. MOBILE TELEPHONY (1997–2002)

Uganda

Kenya

Mauritius

South Africa

Tanzania

Zambia

Lower Income

Lower Middle Income

Upper Middle Income

High Income

0 10203040506070 Percent

Fixed lines per 100 inhabitants Mobile subscribers per 100 inhabitants

Source: ITU 2003 Source: ITU 2003

FIGURE 14. COMPOUND ANNUAL GROWTH RATE OF FIXED VS. MOBILE FIGURE 14. COMPOUND ANNUAL GROWTH RATE OF FIXED VS. MOBILE TELEPHONY (1997–2002) TELEPHONY (1997–2002)

Uganda

Kenya

Mauritius

South Africa

Tanzania

Zambia

Lower Income

Lower Middle Income

Upper Middle Income

High Income −10 40 90 140 190 Percent

Fixed line CAGR (%) Mobile line CAGR (%)

Source: ITU 2003 Source: ITU 2003

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FIGURE 15. INTERNET USERS PER 100 INHABITANTS (1997–2002) FIGURE 15. INTERNET USERS PER 100 INHABITANTS (1997–2002)

Uganda Kenya Mauritius South Africa Tanzania Zambia Lower Income Lower Middle Income Upper Middle Income High Income 0 5 10 15 20 25 30 35 40 45 Percent

lines were not working, and that rural networks Internet Service Providers in Tanzania, although lines were not working, and that rural networks Internet Service Providers in Tanzania, although posed persistent quality problems.29 only 12 are active.33 posed persistent quality problems.29 only 12 are active.33

Despite and, in part, due to the delays and difficulties While these penetration rates demonstrate that Despite and, in part, due to the delays and difficulties While these penetration rates demonstrate that with fixed telephony, there has been a dramatic surge Tanzania is lagging the region and world in terms with fixed telephony, there has been a dramatic surge Tanzania is lagging the region and world in terms in cellular subscribers, as people increasingly choose of ICT access, this gap has been somewhat alleviat- in cellular subscribers, as people increasingly choose of ICT access, this gap has been somewhat alleviat- mobile phones as their primary telephone line. This ed by a rise in mobile telecenters and a boom in mobile phones as their primary telephone line. This ed by a rise in mobile telecenters and a boom in is particularly true for prepaid mobile services, which cyber cafes throughout Tanzania, primarily in is particularly true for prepaid mobile services, which cyber cafes throughout Tanzania, primarily in are considered a cheaper and more flexible option, urban centers. These centers and cafes provide a are considered a cheaper and more flexible option, urban centers. These centers and cafes provide a without the commitments and connection delays remedy for citizens who cannot afford a telephone, without the commitments and connection delays remedy for citizens who cannot afford a telephone, that a fixed line requires (fixed monthly payment computer or internet subscription. that a fixed line requires (fixed monthly payment computer or internet subscription. whether you use the line or not, credit qualifications whether you use the line or not, credit qualifications and connection charges, etc). As of May, 2005, there A more comprehensive analysis of ICT costs in and connection charges, etc). As of May, 2005, there A more comprehensive analysis of ICT costs in are four licensed GSM mobile operators, including: Tanzania reaches a similar conclusion. Although are four licensed GSM mobile operators, including: Tanzania reaches a similar conclusion. Although MIC Tanzania Limited (September 2001); Vodacom access to telecommunications and Internet services MIC Tanzania Limited (September 2001); Vodacom access to telecommunications and Internet services Communications Limited (December 1999); has improved slightly, telecom monopolies and small Communications Limited (December 1999); has improved slightly, telecom monopolies and small Zanzibar Telecom Limited (January 1997); Celtel and dispersed markets drive up the cost of services Zanzibar Telecom Limited (January 1997); Celtel and dispersed markets drive up the cost of services (July 2001). All operators have 15-year renewable and curb widespread adoption. Outbound calls are (July 2001). All operators have 15-year renewable and curb widespread adoption. Outbound calls are licenses.30 There were an estimated 250,000 mobile still higher priced than inbound calls34, especially licenses.30 There were an estimated 250,000 mobile still higher priced than inbound calls34, especially phone subscribers in 2001, with 90% of those using when compared to countries that have more devel- phone subscribers in 2001, with 90% of those using when compared to countries that have more devel- prepaid cards to make calls.31 The percentage of the oped telecom networks and that have taken greater prepaid cards to make calls.31 The percentage of the oped telecom networks and that have taken greater population who now report access to a mobile strides towards liberalization (Mauritius, South population who now report access to a mobile strides towards liberalization (Mauritius, South phone, one belonging to a family member, or part of Africa, and the United States). For instance, a one- phone, one belonging to a family member, or part of Africa, and the United States). For instance, a one- a telecenter, is approximately 97%.32 minute call from South Africa to Tanzania costs a telecenter, is approximately 97%.32 minute call from South Africa to Tanzania costs US$0.49, compared to almost double that price US$0.49, compared to almost double that price In terms of internet hosts and computers, Tanzania (US$0.95) is the same call originates in Tanzania. In terms of internet hosts and computers, Tanzania (US$0.95) is the same call originates in Tanzania. has one of the lowest usage rates in the region. A more telling example comes from comparing the has one of the lowest usage rates in the region. A more telling example comes from comparing the Internet density is particularly low at 0.23 users per costs of calling to the US from Tanzania and Uganda. Internet density is particularly low at 0.23 users per costs of calling to the US from Tanzania and Uganda. 100 inhabitants. Currently, there are 21 licensed While the cost of making a one-minute call from the 100 inhabitants. Currently, there are 21 licensed While the cost of making a one-minute call from the

29 Miller Esselaar and Associates “A Country ICT Survey for Tanzania”, Swedish International Development Cooperation Agency (SIDA), November 2001 29 Miller Esselaar and Associates “A Country ICT Survey for Tanzania”, Swedish International Development Cooperation Agency (SIDA), November 2001 30 Tanzania Communications and Regulatory Authority 30 Tanzania Communications and Regulatory Authority 31 Miller Esselaar and Associates “A Country ICT Survey for Tanzania”, Swedish International Development Cooperation Agency (SIDA), November 2001 31 Miller Esselaar and Associates “A Country ICT Survey for Tanzania”, Swedish International Development Cooperation Agency (SIDA), November 2001 32 Hancock, Simon. “Mobile Phones Boom in Tanzania,” BBC News. Available at http://news.bbc.co.uk/2/hi/programmes/click_online/4706437.stm. 32 Hancock, Simon. “Mobile Phones Boom in Tanzania,” BBC News. Available at http://news.bbc.co.uk/2/hi/programmes/click_online/4706437.stm. 33 Tanzania Communications and Regulatory Authority 33 Tanzania Communications and Regulatory Authority 34 International Inbound and Outbound phone rate graph refers to the following: residential, daytime rates. 34 International Inbound and Outbound phone rate graph refers to the following: residential, daytime rates.

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FIGURE 16. INTRA-REGIONAL AND US RATES FIGURE 16. INTRA-REGIONAL AND US RATES

Intra-Regional Inbound and Inbound & Outbound Calls Outbound Phone Rates from the US

Zambia Zambia

S. Africa S. Africa

Mauritius Mauritius Kenya

Kenya Uganda

Uganda Tanzania

0 0.5 1 1.5 0.00 0.50 1.00 1.50 (US$/Minute) (US$/Minute)

Inbound Calls (To Tanzania, daytime) Outbound Calls (To NYC, US daytime) Outbound Calls (From Tanzania, daytime) Inbound Calls (From NYC, US daytime)

US to these countries is the same (US$0.50), a call US to these countries is the same (US$0.50), a call from Uganda to the US stands at US$0.70, but the FIGURE 17. DIAL-UP AND HIGH from Uganda to the US stands at US$0.70, but the FIGURE 17. DIAL-UP AND HIGH same call from Tanzania is US$0.95. SPEED INTERNET MONTHLY COSTS same call from Tanzania is US$0.95. SPEED INTERNET MONTHLY COSTS

On the other hand, the cost of Internet access is not as On the other hand, the cost of Internet access is not as high as in other countries with the same income level. Zambia high as in other countries with the same income level. For instance, the cost of 20 hr dial-up access in For instance, the cost of 20 hr dial-up access in Tanzania is US$ 117, compared to US$ 170 in Kenya. Tanzania is US$ 117, compared to US$ 170 in Kenya. South Africa and Mauritius, however, offer the same S. Africa South Africa and Mauritius, however, offer the same service for as low as US$33.33 and US$14.80, respec- service for as low as US$33.33 and US$14.80, respec-

tively, see Figure 17. High-speed connection is as high Mauritius tively, see Figure 17. High-speed connection is as high as US$1,500 per month in places like Zambia35, while as US$1,500 per month in places like Zambia35, while Tanzania offers more modest rates (US$ 300/month) Tanzania offers more modest rates (US$ 300/month) that are somewhat higher than in Mauritius (US$ Kenya that are somewhat higher than in Mauritius (US$ 213) and South Africa (US$ 102). Notwithstanding, 213) and South Africa (US$ 102). Notwithstanding, these figures point to an Africa-wide problem in terms these figures point to an Africa-wide problem in terms of high speed Internet access, since comparable service Tanzania of high speed Internet access, since comparable service costs US$ 40–50 in the United States. costs US$ 40–50 in the United States. 0 500 1000 1500 2000 Cost/month (USD) 4.2.2 Infrastructure Constraints 4.2.2 Infrastructure Constraints Dial-up (20 hrs) USD 4.2.2.1 International Connectivity High-Speed (per/month) USD 4.2.2.1 International Connectivity International connectivity in East Africa is scarce, International connectivity in East Africa is scarce, costly, and inconsistent in quality. Countries in west- only gains access to international content and com- costly, and inconsistent in quality. Countries in west- only gains access to international content and com- ern, southern, and northern Africa are connected to munication systems via satellites. Relative to connec- ern, southern, and northern Africa are connected to munication systems via satellites. Relative to connec- submarine fiber optic cable systems that provide both tion via fiber optic cables, broadband connection via submarine fiber optic cable systems that provide both tion via fiber optic cables, broadband connection via intra-regional access and access to the other conti- satellites is very expensive. Satellites also have limited intra-regional access and access to the other conti- satellites is very expensive. Satellites also have limited nents. East Africa has no such connection, and thus, it bandwidth capacity and experience transmission delays. nents. East Africa has no such connection, and thus, it bandwidth capacity and experience transmission delays.

35 Zambia and Kenya have exorbitant high-speed Internet costs due to the mode of connection (mainly connect via satellite) and the monopoly from Telkom 35 Zambia and Kenya have exorbitant high-speed Internet costs due to the mode of connection (mainly connect via satellite) and the monopoly from Telkom Kenya and Zambia Telecom. Kenya and Zambia Telecom.

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FIGURE 18. THE EASSY PROJECT FIGURE 18. THE EASSY PROJECT

Furthermore, some African carriers pay a tremendous project would help to decrease the cost of connec- Furthermore, some African carriers pay a tremendous project would help to decrease the cost of connec- amount in switching fees, translating into hundreds of tivity within Tanzania, and would also facilitate amount in switching fees, translating into hundreds of tivity within Tanzania, and would also facilitate millions of dollars annually to switch intra-African rapid access to non-locally hosted website content. millions of dollars annually to switch intra-African rapid access to non-locally hosted website content. traffic through foreign carriers.36 It should be pointed out that although the EASSY traffic through foreign carriers.36 It should be pointed out that although the EASSY project has gathered attention; a fiber optic link project has gathered attention; a fiber optic link The EASSY project, which is currently under discus- for international connectivity need not only come The EASSY project, which is currently under discus- for international connectivity need not only come sion, aims to provide high-capacity submarine fiber from underwater. A South African firm has begun sion, aims to provide high-capacity submarine fiber from underwater. A South African firm has begun optic cables to increase international connectivity to invest in providing this link from South Africa optic cables to increase international connectivity to invest in providing this link from South Africa between Africa and the international community. to other African countries overland. between Africa and the international community. to other African countries overland. Figure 18 illustrates the proposed connection in black, Figure 18 illustrates the proposed connection in black, connecting the SAFE cable in southern Africa to the 4.2.2.2 The Backbone connecting the SAFE cable in southern Africa to the 4.2.2.2 The Backbone SEA ME WE cable in northern Africa. The EASSY Tanzania’s existing fiber optic networks are owned SEA ME WE cable in northern Africa. The EASSY Tanzania’s existing fiber optic networks are owned project would involve the construction of a 9,900 km and operated by separate, uncoordinated institu- project would involve the construction of a 9,900 km and operated by separate, uncoordinated institu- submarine fiber optic cable system that would link the tions, namely TANESCO, TAZARA, TRC and submarine fiber optic cable system that would link the tions, namely TANESCO, TAZARA, TRC and East African seaboard from Durban, South Africa SONGAS. Each institution has historically utilized East African seaboard from Durban, South Africa SONGAS. Each institution has historically utilized through Mozambique, Madagascar, Tanzania, Kenya, independent network and development plans. through Mozambique, Madagascar, Tanzania, Kenya, independent network and development plans. and finally culminating in a connection to Djibouti.37 However, growing demand for fiber optic connec- and finally culminating in a connection to Djibouti.37 However, growing demand for fiber optic connectivity to facilitate high capacity, quality delivery of tivity to facilitate high capacity, quality delivery of EASSY would help Tanzania meet the growing voice, data, and image services and applications has EASSY would help Tanzania meet the growing voice, data, and image services and applications has demand for broadband, connectivity by ISPs, data forced the Ministry of Communications and demand for broadband, connectivity by ISPs, data forced the Ministry of Communications and service providers, broadcasters, and VOIP providers. Transport and key telecom industry stakeholders to service providers, broadcasters, and VOIP providers. Transport and key telecom industry stakeholders to It would also bolster inter-Africa trade by making assess the national ICT backbone infrastructure It would also bolster inter-Africa trade by making assess the national ICT backbone infrastructure regional communication easier and less expensive. and the potential for cross-sector coordination. regional communication easier and less expensive. and the potential for cross-sector coordination. A preliminary feasibility study estimates that the A preliminary feasibility study estimates that the project would cost US$ 200 million, including a Figure 19 illustrates the existing and “ideal” fiber optic project would cost US$ 200 million, including a Figure 19 illustrates the existing and “ideal” fiber optic US$ 170 million for system supply and US$ 30 and microwave networks within the backbone infra- US$ 170 million for system supply and US$ 30 and microwave networks within the backbone infra- million for project management. structure. This ideal network is based on work done million for project management. structure. This ideal network is based on work done by The Ministry of Communication and Transport, by The Ministry of Communication and Transport, International connectivity is a critical issue in which conducted a report on the “Status of the International connectivity is a critical issue in which conducted a report on the “Status of the improving access to ICT in Tanzania. The EASSY National ICT Infrastructure Backbone” in 2004. improving access to ICT in Tanzania. The EASSY National ICT Infrastructure Backbone” in 2004.

36 EASSY Secretariat Office, Telkom Kenya. Available at http://www.eassy.org/index.htm. 36 EASSY Secretariat Office, Telkom Kenya. Available at http://www.eassy.org/index.htm. 37 Ministry of Communications & Transport. “Technical Report on Feasibility Study for Implementation of the National ICT Backbone Infrastructure,” June 2005. 37 Ministry of Communications & Transport. “Technical Report on Feasibility Study for Implementation of the National ICT Backbone Infrastructure,” June 2005.

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FIGURE 19. NATIONAL FIBER AND MICROWAVE NETWORKS FIGURE 19. NATIONAL FIBER AND MICROWAVE NETWORKS

Existing Ideal

This was followed by an exhaustive technical feasibility evident in Tanzania, where the inadequacy and unco- This was followed by an exhaustive technical feasibility evident in Tanzania, where the inadequacy and unco- study in 2005. According to this research, the project ordinated nature of the current infrastructure back- study in 2005. According to this research, the project ordinated nature of the current infrastructure back- would require the construction of 6,997 km of fiber bone is a clear obstacle to drawing commercial would require the construction of 6,997 km of fiber bone is a clear obstacle to drawing commercial optic cables and approximately 3,475 km of links. providers into rural areas, leaving these communities optic cables and approximately 3,475 km of links. providers into rural areas, leaving these communities Once the networks have been joined and the necessary with limited or no access to ICT requiring fiber optic Once the networks have been joined and the necessary with limited or no access to ICT requiring fiber optic linkages built, the backbone would provide fiber optic connections. linkages built, the backbone would provide fiber optic connections. capacity for lease and use by different operators. capacity for lease and use by different operators. The penetration rates of fixed phone lines and inter- The penetration rates of fixed phone lines and inter- The costs of building the necessary fiber optic net users are largely skewed by the number of people The costs of building the necessary fiber optic net users are largely skewed by the number of people cables and links in existing networks were estimated who do not have access in rural areas. In considering cables and links in existing networks were estimated who do not have access in rural areas. In considering to be US$169 million. These costs, compiled in how to improve access and ability in rural areas, it is to be US$169 million. These costs, compiled in how to improve access and ability in rural areas, it is Table 2, are substantial, but the potential benefits important to think about optimizing existing ICT Table 2, are substantial, but the potential benefits important to think about optimizing existing ICT in backbone infrastructure investment and coordi- according to their ability to increase income or in backbone infrastructure investment and coordi- according to their ability to increase income or nation are great. The GOT should explore ways to reduce cost among rural populations. In a recent sur- nation are great. The GOT should explore ways to reduce cost among rural populations. In a recent sur- spur investment in this project. vey within rural communities, respondents reported spur investment in this project. vey within rural communities, respondents reported the following current uses of ICT by frequency and the following current uses of ICT by frequency and 4.2.3 The Urban/Rural Digital Divide the relative impact of one of the most prominent 4.2.3 The Urban/Rural Digital Divide the relative impact of one of the most prominent Much has been written about the “digital divide” ICT tools, the mobile phone, on their financial capi- Much has been written about the “digital divide” ICT tools, the mobile phone, on their financial capi- 38 38 between urban and rural areas. This issue is particularly tal. See Figure 20 and Figure 21. between urban and rural areas. This issue is particularly tal. See Figure 20 and Figure 21.

It is clear that ICT in the form of mobile telephones It is clear that ICT in the form of mobile telephones TABLE 2. Estimated backbone have emerged as an import saver of cost and time in TABLE 2. Estimated backbone have emerged as an import saver of cost and time in investment costs rural areas. Experts express concern, however, that investment costs rural areas. Experts express concern, however, that this “leapfrog” effect of wireless may come at the this “leapfrog” effect of wireless may come at the Description Sub total (US$) expense of fiber optic build-out and its potential for Description Sub total (US$) expense of fiber optic build-out and its potential for Optical Fiber Cable Installation $106,467,659 more reliable data transfer, increasing the existing Optical Fiber Cable Installation $106,467,659 more reliable data transfer, increasing the existing rural-urban divide. This pitfall has been tempered in rural-urban divide. This pitfall has been tempered in Transmission Equipment Installation $35,742,135 part by the presence of Multipurpose Community Transmission Equipment Installation $35,742,135 part by the presence of Multipurpose Community

Power Supply System Installation $12,255,063 Telecentres, such as the site in Sengerema, which Power Supply System Installation $12,255,063 Telecentres, such as the site in Sengerema, which provide shared ICT resources to rural populations. provide shared ICT resources to rural populations. Civil Work And Others $15,067,000 Civil Work And Others $15,067,000

Grand Total $169,531,857 The Sengerema Multipurpose Community Telecentre Grand Total $169,531,857 The Sengerema Multipurpose Community Telecentre (MCT) began as a pilot project in 2000, sponsored by (MCT) began as a pilot project in 2000, sponsored by

38 Department for International Development (DFID) KaR Project 8347: The Economic Impact of Telecommunications on Rural Livelihoods and Poverty 38 Department for International Development (DFID) KaR Project 8347: The Economic Impact of Telecommunications on Rural Livelihoods and Poverty Reduction: A Study of Rural Communities in India (Gujarat), Mozambique and Tanzania, June 2005 Reduction: A Study of Rural Communities in India (Gujarat), Mozambique and Tanzania, June 2005

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FIGURE 20. FREQUENCY OF ICT USAGE WITHIN RURAL AREAS FIGURE 20. FREQUENCY OF ICT USAGE WITHIN RURAL AREAS

Source: DFID, June 2005 Source: DFID, June 2005

the Commission on Science and Technology The impact of the MCT on quality of life in the Commission on Science and Technology The impact of the MCT on quality of life in (COSTECH) and UNESCO. Currently, the MCT serves Sengerema has been important. In addition to (COSTECH) and UNESCO. Currently, the MCT serves Sengerema has been important. In addition to Sengerena’s population of 500,000 with 25 computers, providing services that enable commerce and educa- Sengerena’s population of 500,000 with 25 computers, providing services that enable commerce and educa- internet connectivity, and a broadcast radio. The launch tion—for example, providing farmers information internet connectivity, and a broadcast radio. The launch tion—for example, providing farmers information of the MTC required an investment of US$400,000 via CD-R on increasing crop yields and rural stu- of the MTC required an investment of US$400,000 via CD-R on increasing crop yields and rural stu- of donor money. The MCT began as a telecentre, dents photocopies of national examinations—the of donor money. The MCT began as a telecentre, dents photocopies of national examinations—the offering telephone access, and has since expanded its MCT has been vital in disseminating public health offering telephone access, and has since expanded its MCT has been vital in disseminating public health range of services to include radio, photocopying and information. When the MCT opened in Sengerema, range of services to include radio, photocopying and information. When the MCT opened in Sengerema, internet access. The demand for these services is per- fewer than 50% of babies were vaccinated. The internet access. The demand for these services is per- fewer than 50% of babies were vaccinated. The haps best illustrated by tracking the MTC’s growth in vaccines were free of cost at local clinics, but new haps best illustrated by tracking the MTC’s growth in vaccines were free of cost at local clinics, but new revenue. Its initial monthly revenue in 2001 was mothers did not have adequate information regard- revenue. Its initial monthly revenue in 2001 was mothers did not have adequate information regard- US$300/month, and now stands at US$3,000/month. ing the need for vaccines or their cost. As a result, US$300/month, and now stands at US$3,000/month. ing the need for vaccines or their cost. As a result,

FIGURE 21. PERCEIVED IMPACT OF MOBILE TELEPHONY ON FINANCIAL FIGURE 21. PERCEIVED IMPACT OF MOBILE TELEPHONY ON FINANCIAL CAPITAL AMONG RURAL POPULATIONS CAPITAL AMONG RURAL POPULATIONS

Source: DFID, June 2005 Source: DFID, June 2005

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this service was underutilized and failed to impact this service was underutilized and failed to impact infant mortality rates. The MCT began broadcasting FIGURE 22. SCHOOL ENROLLMENT infant mortality rates. The MCT began broadcasting FIGURE 22. SCHOOL ENROLLMENT radio announcements reminding mothers to vacci- INDICATORS 2002 radio announcements reminding mothers to vacci- INDICATORS 2002 nate their babies, and within eight weeks the vacci- nate their babies, and within eight weeks the vacci- nation rate among newborn babies approached 100%. nation rate among newborn babies approached 100%. 3.2 Uganda* 14.2 89.0 Another important area to consider when assessing 2.9 Another important area to consider when assessing Kenya* 24.5 ICT access in Tanzania is local content. Ensuring a 66.5 ICT access in Tanzania is local content. Ensuring a 15.2 suitable amount of local content will increase access Mauritius 70.6 suitable amount of local content will increase access for a large segment of the population that may not 90.4 for a large segment of the population that may not 15.0 South Africa 65.5 read English. For instance, Microsoft sees a market 89.0 read English. For instance, Microsoft sees a market for its software among the roughly 100 million 0.9 for its software among the roughly 100 million Tanzania* 5.0 Swahili speakers in East Africa, and the company is 68.8 Swahili speakers in East Africa, and the company is now working to incorporate Swahili into Microsoft 2.4 now working to incorporate Swahili into Microsoft Zambia* 22.8 Windows, Microsoft Office and other popular 68.4 Windows, Microsoft Office and other popular programs. The same is true for Google, which has 0 20 40 60 80 100 programs. The same is true for Google, which has Percent launched www.google.co.ke, offering a Kenyan launched www.google.co.ke, offering a Kenyan School enrollment, tertiary (% gross) version in Swahili of the popular search engine. A School enrollment, secondary (% net) version in Swahili of the popular search engine. A major key to access is devising strategies and software School enrollment, primary (% net) major key to access is devising strategies and software to put local languages on the screen, which will to put local languages on the screen, which will increase the value and consumptions of information Source: World Development Indicators, World Bank 2004. increase the value and consumptions of information Source: World Development Indicators, World Bank 2004. technology. This is particularly relevant for rural Note*: Secondary encollment rates for Tanzania are from technology. This is particularly relevant for rural Note*: Secondary encollment rates for Tanzania are from 2001 http://devdata.worldbook.org/genderstats. Tertiary 2001 http://devdata.worldbook.org/genderstats. Tertiary areas, which are often more limited by language. rates for Kenya and Zambia are from WDI 2000. Uganda ter- areas, which are often more limited by language. rates for Kenya and Zambia are from WDI 2000. Uganda ter- Projects aimed at increasing awareness will need to tiary levels from 2001 and primary levels from The World Projects aimed at increasing awareness will need to tiary levels from 2001 and primary levels from The World ensure that they endorse programs in Swahili, partic- Bank Education Notes April 2002 with data form 2000. ensure that they endorse programs in Swahili, partic- Bank Education Notes April 2002 with data form 2000. ularly websites for domestic commerce. ularly websites for domestic commerce. While these primary education figures are cause for While these primary education figures are cause for concern, secondary enrollment is still the greatest concern, secondary enrollment is still the greatest educational weakness in Tanzania. About 22% of educational weakness in Tanzania. About 22% of primary students have a chance to pursue secondary primary students have a chance to pursue secondary 4.3 LOW LEVEL OF ABILITY education, which translates into 5% net secondary 4.3 LOW LEVEL OF ABILITY education, which translates into 5% net secondary enrollment of the relevant age group, compared enrollment of the relevant age group, compared 4.3.1 Basic Educational Deficiencies with an average of nearly 30% across Sub-Saharan 4.3.1 Basic Educational Deficiencies with an average of nearly 30% across Sub-Saharan In addition to minimal access, limited ability to use Africa.39 The secondary school system in Tanzania In addition to minimal access, limited ability to use Africa.39 The secondary school system in Tanzania ICT is also responsible for the lack of ICT penetra- faces a number of challenges, including demands to ICT is also responsible for the lack of ICT penetra- faces a number of challenges, including demands to tion in Tanzania. Ability refers to the willingness and increase access (especially for low-income youths tion in Tanzania. Ability refers to the willingness and increase access (especially for low-income youths preparedness of individuals to use ICT, a direct func- and students in rural areas), improve quality and preparedness of individuals to use ICT, a direct func- and students in rural areas), improve quality and tion of their level of education and technology training. reduce costs.40 During the 1980s and early 1990s, tion of their level of education and technology training. reduce costs.40 During the 1980s and early 1990s, Tanzania faces significant ability barriers. While recent increased private sector participation and communi- Tanzania faces significant ability barriers. While recent increased private sector participation and communi- reforms in primary education have lifted enrollment ty involvement led to the rapid growth of non- reforms in primary education have lifted enrollment ty involvement led to the rapid growth of non- rates, secondary school enrollment and tertiary educa- government secondary schools as a way to cope rates, secondary school enrollment and tertiary educa- government secondary schools as a way to cope tion are among the lowest in Sub-Saharan Africa— with some of the excess demand.41 Currently, it has tion are among the lowest in Sub-Saharan Africa— with some of the excess demand.41 Currently, it has just 5% and 1% respectively. See Figure 22. been estimated that close to 40% of secondary stu- just 5% and 1% respectively. See Figure 22. been estimated that close to 40% of secondary students are enrolled by private providers. dents are enrolled by private providers. The primary education reforms implemented dur- The primary education reforms implemented during the 1990s have had a positive effect. Although The recent increase in primary education, however, will ing the 1990s have had a positive effect. Although The recent increase in primary education, however, will Tanzanian rates are on par with other Sub-Saharan create mounting pressures from the state to provide Tanzanian rates are on par with other Sub-Saharan create mounting pressures from the state to provide countries (Kenya and Zambia), they still lag places in secondary schools, expanding access beyond a countries (Kenya and Zambia), they still lag places in secondary schools, expanding access beyond a Botswana, Mauritius and South Africa, which have small group of privileged youth. The picture becomes Botswana, Mauritius and South Africa, which have small group of privileged youth. The picture becomes upwards of 80% net primary enrollments. even more complicated when the urgent need for upwards of 80% net primary enrollments. even more complicated when the urgent need for

39 Ibid 39 Ibid 40 Ibid 40 Ibid 41 Ibid 41 Ibid

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Tanzania to transform its economy is included; institutions in maintaining systems and software on Tanzania to transform its economy is included; institutions in maintaining systems and software on Tanzania is being crippled by its inability to develop the multiple computers. Schools, in this case, use a central Tanzania is being crippled by its inability to develop the multiple computers. Schools, in this case, use a central human capital it will need to drive this transformation. server or thin client system to operate several machines. human capital it will need to drive this transformation. server or thin client system to operate several machines. This allows all software, computing power and data This allows all software, computing power and data 4.3.2 Incorporating ICT into storage to take place on a central server, reducing power 4.3.2 Incorporating ICT into storage to take place on a central server, reducing power the Education System usage and allowing for low bandwidth connections. If the Education System usage and allowing for low bandwidth connections. If the pilot project is effective, it would provide a cost- the pilot project is effective, it would provide a cost- Efforts are being made to incorporate ICT tools into Efforts are being made to incorporate ICT tools into effective means to introduce students to ICT. effective means to introduce students to ICT. secondary schools in Tanzania, but the results have secondary schools in Tanzania, but the results have been mixed. The Distance Learning and Education been mixed. The Distance Learning and Education These two initiatives are laudable, but face two These two initiatives are laudable, but face two Services (DILES) project was created to distribute Services (DILES) project was created to distribute problems. The first is leveraging the internet in problems. The first is leveraging the internet in secondary school information to students via the secondary school information to students via the places where connectivity is not available or reli- places where connectivity is not available or reli- internet. The initiative was developed with an eye internet. The initiative was developed with an eye able, and thus much information requires paper for able, and thus much information requires paper for towards reaching students in rural areas, where towards reaching students in rural areas, where dissemination. The second is the rationalization of dissemination. The second is the rationalization of books are expensive and good teachers are hard to books are expensive and good teachers are hard to ICT investment by the public sector. The issue of ICT investment by the public sector. The issue of find. The project was fully funded by the find. The project was fully funded by the connectivity needs to be solved before it can be connectivity needs to be solved before it can be International Institute for Communication and International Institute for Communication and leveraged to improve learning and create incentives leveraged to improve learning and create incentives Development (IICD) and began operations in 2000. Development (IICD) and began operations in 2000. for people to invest in computer and ICT skills. for people to invest in computer and ICT skills. Students who cannot afford textbooks can download Students who cannot afford textbooks can download curricula and syllabi from the website. The syllabi are 4.3.3 Tertiary Enrollment curricula and syllabi from the website. The syllabi are 4.3.3 Tertiary Enrollment based on the national syllabus, so they correspond Enrollment ratios in primary and secondary educa- based on the national syllabus, so they correspond Enrollment ratios in primary and secondary educa- with the teachings the students are receiving in the tion are an indicator of the future quality of human with the teachings the students are receiving in the tion are an indicator of the future quality of human classroom. There are also twelve years of solved capital. Naturally, low enrollment rates in second- classroom. There are also twelve years of solved capital. Naturally, low enrollment rates in second- national examination papers. Students can order hard ary education contribute to the observed skill gap national examination papers. Students can order hard ary education contribute to the observed skill gap copies at less than cost; US$ 2.00 for a comprehen- in higher education in Tanzania. The country has copies at less than cost; US$ 2.00 for a comprehen- in higher education in Tanzania. The country has sive mathematics syllabus for example and the solved one of the lowest attainments in tertiary schooling sive mathematics syllabus for example and the solved one of the lowest attainments in tertiary schooling national exams at US$ 0.20 per exam. The rationale in the region, with less than 1% of the population national exams at US$ 0.20 per exam. The rationale in the region, with less than 1% of the population was that without this service students would have dif- attending university. Although this is common in was that without this service students would have dif- attending university. Although this is common in ficulty accessing these documents. Sub-Saharan Africa, countries such as South Africa ficulty accessing these documents. Sub-Saharan Africa, countries such as South Africa and Mauritius have managed to enroll more than and Mauritius have managed to enroll more than Though DILES was never solely a commercial ven- 15% of the population in tertiary education. Though DILES was never solely a commercial ven- 15% of the population in tertiary education. ture, as downloads of syllabi have always been free, ture, as downloads of syllabi have always been free, DILES did hope to eventually commercialize the One indicator of the attractiveness of investing in edu- DILES did hope to eventually commercialize the One indicator of the attractiveness of investing in edu- operation through selling access licenses and CDs on cation in Tanzania, is the estimated rate of return on operation through selling access licenses and CDs on cation in Tanzania, is the estimated rate of return on an offline system. The plan of creating a business education and training. These are presented in Table 3 an offline system. The plan of creating a business education and training. These are presented in Table 3 based on a market of poor rural students, however, and are categorized by type of education and gender. As based on a market of poor rural students, however, and are categorized by type of education and gender. As has not come to fruition. In very remote settings, stu- this table indicates, private rates of return increase with has not come to fruition. In very remote settings, stu- this table indicates, private rates of return increase with dents do not have access to the internet, and printing educational attainment, and become more relevant for dents do not have access to the internet, and printing educational attainment, and become more relevant for costs are prohibitive. DILES has had to change its university and vocational and technical training. For costs are prohibitive. DILES has had to change its university and vocational and technical training. For strategy for reaching the students and is now making instance, wages are approximately 7% higher for some- strategy for reaching the students and is now making instance, wages are approximately 7% higher for some- hard copies of all materials and using donor funds to one completing secondary education than for someone hard copies of all materials and using donor funds to one completing secondary education than for someone distribute their database of information to more than just completing primary schooling. Likewise, a universi- distribute their database of information to more than just completing primary schooling. Likewise, a universi- 1,000 schools and teacher training colleges. ty degree and vocational and technical training increase 1,000 schools and teacher training colleges. ty degree and vocational and technical training increase earnings, on average by 9% and 19.4% respectively. earnings, on average by 9% and 19.4% respectively. Another initiative aimed at incorporating ICT into sec- However, a recent World Bank publication points to Another initiative aimed at incorporating ICT into sec- However, a recent World Bank publication points to ondary schools is the Thin Client Computers project the fact that given the relative scarcity of post-primary ondary schools is the Thin Client Computers project the fact that given the relative scarcity of post-primary implemented by the GOT in collaboration with SIDA. education in Tanzania, the reported returns to educa- implemented by the GOT in collaboration with SIDA. education in Tanzania, the reported returns to educa- The project is being piloted in urban settings, and is tion appear low relative to international standards.42 The project is being piloted in urban settings, and is tion appear low relative to international standards.42 aimed at reducing the cost burden of many educational This may reveal the low relevance of post-primary aimed at reducing the cost burden of many educational This may reveal the low relevance of post-primary

42 World Bank 2002 42 World Bank 2002

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TABLE 3. Annual private rates of return to education and training TABLE 3. Annual private rates of return to education and training

(percent) Education Level Training (percent) Education Level Training Vocational & On the Vocational & On the Group Primary Secondary University Technical Job Group Primary Secondary University Technical Job All 3.6 6.9 9.0 19.4 35.2 All 3.6 6.9 9.0 19.4 35.2

Male 1.9 6.6 9.9 17.8 33.0 Male 1.9 6.6 9.9 17.8 33.0

Female 10.8 9.0 11.4 20.2 35.0 Female 10.8 9.0 11.4 20.2 35.0

Source: World Bank 1997 Source: World Bank 1997

education to the requirements of Tanzania’s economy.43 Although some commendable efforts have been made education to the requirements of Tanzania’s economy.43 Although some commendable efforts have been made This dynamic reinforces the urgency of upgrading the to make academic and training programs more rele- This dynamic reinforces the urgency of upgrading the to make academic and training programs more rele- economic model for Tanzania. vant to the needs of the labor market and to incorpo- economic model for Tanzania. vant to the needs of the labor market and to incorporate IT in the education system, wider ICT literacy rate IT in the education system, wider ICT literacy will only become a reality when both individuals and will only become a reality when both individuals and 4.3.4 Training: Not Yet Driven By organizations use ICT in their daily lives and when 4.3.4 Training: Not Yet Driven By organizations use ICT in their daily lives and when Private Sector Needs appropriate advanced training becomes available to Private Sector Needs appropriate advanced training becomes available to In fact, the general perception of business leaders is those entering (and already in) the workforce. In fact, the general perception of business leaders is those entering (and already in) the workforce. that the disconnect between academic and training that the disconnect between academic and training institutions and the skill set demanded by the private Workforce ability is coupled with access as prerequi- institutions and the skill set demanded by the private Workforce ability is coupled with access as prerequi- sector is one of the main obstacles to the develop- sites to productive ICT usage, but they are mean- sector is one of the main obstacles to the develop- sites to productive ICT usage, but they are mean- ment and utilization of ICT. A local Tanzanian busi- ingless if users do not recognize tangible benefits of ment and utilization of ICT. A local Tanzanian busi- ingless if users do not recognize tangible benefits of nessman, the head of a successful group of companies ICT. Investments must be rationalized against nessman, the head of a successful group of companies ICT. Investments must be rationalized against that includes several ICT firms, confirmed this asser- potential ICT advantages or competing uses of time that includes several ICT firms, confirmed this asser- potential ICT advantages or competing uses of time tion. In response to this deficiency, he is assisting in and capital. The benefits component of the AAB tion. In response to this deficiency, he is assisting in and capital. The benefits component of the AAB drafting a proposal for a study to determine the model is explored in the following section. In this drafting a proposal for a study to determine the model is explored in the following section. In this appropriate ICT training needs of the private sector. section we investigate the current and potential role appropriate ICT training needs of the private sector. section we investigate the current and potential role By first identifying the needs of Tanzanian business of ICT in certain sectors: Agribusiness, Mining & By first identifying the needs of Tanzanian business of ICT in certain sectors: Agribusiness, Mining & in ICT, training programs can be developed that Minerals, Services and SMEs in general. In each of in ICT, training programs can be developed that Minerals, Services and SMEs in general. In each of address the specific requirements of businesses. The the three economic sectors, we also provide a sector address the specific requirements of businesses. The the three economic sectors, we also provide a sector University of Dar es Salaam has taken a proactive audit and offer preliminary recommendations to University of Dar es Salaam has taken a proactive audit and offer preliminary recommendations to approach to this issue. improve each sector’s competitiveness. approach to this issue. improve each sector’s competitiveness.

BOX 1 The University Computing Centre Ltd.: “one student, one computer” BOX 1 The University Computing Centre Ltd.: “one student, one computer”

The University Computing Centre, Ltd is the primary provider of ICT training courses within Tanzania. It was created as a private company The University Computing Centre, Ltd is the primary provider of ICT training courses within Tanzania. It was created as a private company within the University of Dar Es Salaam in 2001, so that it could concentrate on service provision, revenue generation, and offer competitive within the University of Dar Es Salaam in 2001, so that it could concentrate on service provision, revenue generation, and offer competitive compensation to its professors and staff. The UCC has five locations throughout the country and is concentrated in four lines of business: compensation to its professors and staff. The UCC has five locations throughout the country and is concentrated in four lines of business: 1) ICT training, 2) Software development, 3) Licensed ISP, and 4) Hardware engineering and maintenance. ICT is its primary revenue gen- 1) ICT training, 2) Software development, 3) Licensed ISP, and 4) Hardware engineering and maintenance. ICT is its primary revenue gen- erator, and the UCC offers both basic courses in Microsoft applications and ISDL certification, as well as tailor-made courses driven by the erator, and the UCC offers both basic courses in Microsoft applications and ISDL certification, as well as tailor-made courses driven by the government and private sector’s ICT needs. Its “one student, one computer” motto and training model have been very successful, and has government and private sector’s ICT needs. Its “one student, one computer” motto and training model have been very successful, and has forced competitors to invest in equipment and hardware. forced competitors to invest in equipment and hardware.

The UCC illustrates both the importance of responding to the demand needs and customer preferences within the ICT market, as well as the The UCC illustrates both the importance of responding to the demand needs and customer preferences within the ICT market, as well as the potential return on investment of education and training. By customizing their offerings, UCC has grown its client base and generated potential return on investment of education and training. By customizing their offerings, UCC has grown its client base and generated US$ 2.5 million in 2004, with an expected US$ 3.5 million in 2005. Additionally, the increased earnings potential of UCC graduates US$ 2.5 million in 2004, with an expected US$ 3.5 million in 2005. Additionally, the increased earnings potential of UCC graduates is significant. An estimated 100% of UCC students who complete the CISCO training course, have a job at the time of graduation. The is significant. An estimated 100% of UCC students who complete the CISCO training course, have a job at the time of graduation. The course costs $600, and starting salaries upon graduation are between $250 and $300 per month. course costs $600, and starting salaries upon graduation are between $250 and $300 per month.

Source: OTF Group Interview Source: OTF Group Interview

43 Ibid 43 Ibid

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Leaders in developing countries such as Tanzania Leaders in developing countries such as Tanzania 5 MIGRATING live and work in environments where literally 5 MIGRATING live and work in environments where literally everything needs urgent attention. Despite such a everything needs urgent attention. Despite such a context, the need to focus on a few industries in context, the need to focus on a few industries in TO MORE order to drive sustainable economic transforma- TO MORE order to drive sustainable economic transformation is paramount because—by definition— tion is paramount because—by definition— SOPHISTICATED human, financial, and institutional resources are SOPHISTICATED human, financial, and institutional resources are scarce in developing economies. Focusing these scarce in developing economies. Focusing these PRODUCTS AND resources on ensuring that two or three local PRODUCTS AND resources on ensuring that two or three local industries get the support they need to compete industries get the support they need to compete successfully and generate income and employment successfully and generate income and employment SERVICES is essential. In the case of Tanzania, where many SERVICES is essential. In the case of Tanzania, where many local industries present real income generation local industries present real income generation and employment opportunities, the need to com- and employment opportunities, the need to combine support for a few nascent industries with a bine support for a few nascent industries with a focused and targeted investment promotion effort, focused and targeted investment promotion effort, is crucial. Neglecting to see this reality and diverg- is crucial. Neglecting to see this reality and diverg- 5.1 TWO PATHS: KEY ing time, effort, and resources on too many indus- 5.1 TWO PATHS: KEY ing time, effort, and resources on too many indus- SECTORS AND SMES tries may be today’s greatest mistake in economic SECTORS AND SMES tries may be today’s greatest mistake in economic development. development. At US$ 322 per capita income in 2004, Tanzania At US$ 322 per capita income in 2004, Tanzania is one of the poorest countries in the world. If Today’s successfully developing economies have is one of the poorest countries in the world. If Today’s successfully developing economies have Tanzanians were to enjoy middle income status followed a similar process. They became world or Tanzanians were to enjoy middle income status followed a similar process. They became world or of, say US$ 1,000 per capita income by 2013, regional leaders in a few industries. They generate of, say US$ 1,000 per capita income by 2013, regional leaders in a few industries. They generate Tanzania’s GDP would need to grow from US$ income, expertise, and respect in a first set of prior- Tanzania’s GDP would need to grow from US$ income, expertise, and respect in a first set of prior- 11.1 billion to US$ 43.0 billion in 10 years. ity industries, and then invested their surpluses, 11.1 billion to US$ 43.0 billion in 10 years. ity industries, and then invested their surpluses, incoming investment, and leadership capacity in incoming investment, and leadership capacity in To achieve such accelerated rates of economic other strategic industries. Mauritius does well when To achieve such accelerated rates of economic other strategic industries. Mauritius does well when growth, two sets of economic objectives must be its tourism, textile, and sugar industries do well. growth, two sets of economic objectives must be its tourism, textile, and sugar industries do well. pursued. First, Tanzania must invest in developing Today, its position in the textile and sugar indus- pursued. First, Tanzania must invest in developing Today, its position in the textile and sugar indus- the competitiveness of key, high-potential industries is being compromised, but thanks to years of the competitiveness of key, high-potential industries is being compromised, but thanks to years of tries. Second, Tanzania must develop support pro- success in its core industries, Mauritius has the tries. Second, Tanzania must develop support pro- success in its core industries, Mauritius has the grams and initiatives that broadly strengthen SMEs resources and credibility to establish strong posi- grams and initiatives that broadly strengthen SMEs resources and credibility to establish strong posi- and the private sector overall. In essence, the dou- tions in other areas such as offshore banking and and the private sector overall. In essence, the dou- tions in other areas such as offshore banking and ble impact of key industries ‘pulling’ the rest of the ICT services. Other successful formerly ‘developing ble impact of key industries ‘pulling’ the rest of the ICT services. Other successful formerly ‘developing economy, while business development services are economies’ have followed similar paths, including economy, while business development services are economies’ have followed similar paths, including ‘pushing’ the capacity of the private sector to Korea, Singapore, Tunisia and Malaysia. ‘pushing’ the capacity of the private sector to Korea, Singapore, Tunisia and Malaysia. respond to more localized opportunities is the kind Tanzania—as well as most other African respond to more localized opportunities is the kind Tanzania—as well as most other African of virtuous mechanism that Tanzania needs to drive economies—could learn a tremendous amount by of virtuous mechanism that Tanzania needs to drive economies—could learn a tremendous amount by a significant expansion of its economy. studying their experiences. a significant expansion of its economy. studying their experiences.

It is important to clarify the first objective in light In parallel with competitiveness-building programs It is important to clarify the first objective in light In parallel with competitiveness-building programs of the many failed industrial strategies throughout for key local industries, Tanzanian leaders should of the many failed industrial strategies throughout for key local industries, Tanzanian leaders should the developing world. This is not a process where also launch initiatives to strengthen the private sec- the developing world. This is not a process where also launch initiatives to strengthen the private sec- a few government officials pick economic winners tor overall with a particular focus on SMEs, the a few government officials pick economic winners tor overall with a particular focus on SMEs, the and losers. Competitiveness rests on a productive segment that now needs the most support. Private and losers. Competitiveness rests on a productive segment that now needs the most support. Private public/private sector dialogue and, ultimately, on sector and enterprise development relies heavily public/private sector dialogue and, ultimately, on sector and enterprise development relies heavily private sector leadership of the economy with on the competitiveness of key local industries. In private sector leadership of the economy with on the competitiveness of key local industries. In informed government support. This objective is Africa, as in many other parts of the world, three informed government support. This objective is Africa, as in many other parts of the world, three centered on making necessary tradeoffs, tradeoffs primary categories of local enterprises exist. The centered on making necessary tradeoffs, tradeoffs primary categories of local enterprises exist. The that can only be made effectively within this type first category directly drives the main industries of that can only be made effectively within this type first category directly drives the main industries of of collaborative environment. the economy. These would include hotels, lodges, of collaborative environment. the economy. These would include hotels, lodges,

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or airlines in a tourism-dependent country. The SMEs mentioned above can benefit from ICT. or airlines in a tourism-dependent country. The SMEs mentioned above can benefit from ICT. second category supports larger businesses operat- Finally models are discussed that can provide SMEs second category supports larger businesses operat- Finally models are discussed that can provide SMEs ing in key local industries; these could be spare-part with the support required to drive the economy. ing in key local industries; these could be spare-part with the support required to drive the economy. manufacturers or leather seat suppliers to a strong manufacturers or leather seat suppliers to a strong local automotive cluster. The third category refers local automotive cluster. The third category refers to SMEs that indirectly benefit from the increased to SMEs that indirectly benefit from the increased purchasing power that successful local industries 5.2 AGRIBUSINESS purchasing power that successful local industries 5.2 AGRIBUSINESS are generating. These would include local retail and are generating. These would include local retail and grocery stores in a prosperous mining town or To be clear, this section is labeled “Agribusiness” grocery stores in a prosperous mining town or To be clear, this section is labeled “Agribusiness” neighborhood restaurants and bars in a thriving and not “Agriculture” to reflect the role of agricul- neighborhood restaurants and bars in a thriving and not “Agriculture” to reflect the role of agricul- coffee export town. ture as inputs into more sophisticated products. coffee export town. ture as inputs into more sophisticated products. This perspective highlights the need for strong This perspective highlights the need for strong By building strong key industries, therefore, linkages between the agricultural inputs, the manu- By building strong key industries, therefore, linkages between the agricultural inputs, the manu- Tanzanian leaders will also be driving private sector facturing processing centers and final markets. Tanzanian leaders will also be driving private sector facturing processing centers and final markets. and enterprise development directly or indirectly. In Increasing agricultural productivity goes hand in and enterprise development directly or indirectly. In Increasing agricultural productivity goes hand in order to achieve such diffused impact, however, hand with increasing productivity in manufactur- order to achieve such diffused impact, however, hand with increasing productivity in manufactur- Tanzanian leaders will also have to strengthen the ing. Success in the agribusiness sub-sectors Tanzanian leaders will also have to strengthen the ing. Success in the agribusiness sub-sectors ability of local SMEs to exploit the opportunity that described in this section will rely on increased ability of local SMEs to exploit the opportunity that described in this section will rely on increased this type of growth presents. One mechanism is to value-added processing/manufacturing. this type of growth presents. One mechanism is to value-added processing/manufacturing. develop a stronger platform of institutions that can develop a stronger platform of institutions that can provide business development and incubation support In general, agribusiness exports now rely on very provide business development and incubation support In general, agribusiness exports now rely on very services. ICT are critical to these types of initiatives, limited processing of the primary agricultural services. ICT are critical to these types of initiatives, limited processing of the primary agricultural as well, in two primary ways: 1) the dissemination of goods. Raw materials such as coffee, cashews, as well, in two primary ways: 1) the dissemination of goods. Raw materials such as coffee, cashews, assistance and information to a large number of geo- tobacco and tea are exported to international mar- assistance and information to a large number of geo- tobacco and tea are exported to international mar- graphically dispersed SMEs and 2) facilitating the kets with very little value added to them. Total graphically dispersed SMEs and 2) facilitating the kets with very little value added to them. Total upgrade in SME efficiency and strategic capacity. exports in these major sectors have also decreased, upgrade in SME efficiency and strategic capacity. exports in these major sectors have also decreased, as shown in Table 4, partly due to global trends as shown in Table 4, partly due to global trends ICT’s role in the migration to more sophisticated in commodity prices. Agriculture, Fishing and ICT’s role in the migration to more sophisticated in commodity prices. Agriculture, Fishing and products and services, therefore, is vital to both key Forestry constitute a significant portion of products and services, therefore, is vital to both key Forestry constitute a significant portion of sectors and SMEs. But these technologies will only Tanzania’s economy, responsible for 40–50% of sectors and SMEs. But these technologies will only Tanzania’s economy, responsible for 40–50% of be effective once competitive strategies are in place. GDP. Thus, strategies that increase the value of be effective once competitive strategies are in place. GDP. Thus, strategies that increase the value of The following sections begin with a discussion of these sectors’ products could have a particularly The following sections begin with a discussion of these sectors’ products could have a particularly each sector’s strategic challenges and opportunities. broad impact on the prosperity of Tanzanians. each sector’s strategic challenges and opportunities. broad impact on the prosperity of Tanzanians. Then, within this context, targeted ICT interven- Then, within this context, targeted ICT interventions are proposed as part of the process of sector An overarching agriculture strategy, however, is not tions are proposed as part of the process of sector An overarching agriculture strategy, however, is not upgrading to differentiated products. ICT interven- what is required. Specific strategies are needed for upgrading to differentiated products. ICT interven- what is required. Specific strategies are needed for tions are discussed first at a firm or value chain tions are discussed first at a firm or value chain level, according to the Heeks & Duncombe* Five level, according to the Heeks & Duncombe* Five Levels of ICT Usage model, and then at an industry TABLE 4. Selected exports compound Levels of ICT Usage model, and then at an industry TABLE 4. Selected exports compound level, addressing the systemic ICT needs and oppor- annual growth 1998–2003 level, addressing the systemic ICT needs and oppor- annual growth 1998–2003 tunities. In most cases, recommendations center on tunities. In most cases, recommendations center on upgrading to the next level of value creation. This Product CAGR upgrading to the next level of value creation. This Product CAGR should be interpreted as the next step in a long Cashews 47.7% should be interpreted as the next step in a long Cashews 47.7% process, and not as a final destination. In identify- process, and not as a final destination. In identifying ever higher value markets, and developing ever Coffee 8.2% ing ever higher value markets, and developing ever Coffee 8.2%

more specialized processing abilities, increasing lev- Tobacco 1.2% more specialized processing abilities, increasing lev- Tobacco 1.2% els of ICT usage will continue to be fundamental. els of ICT usage will continue to be fundamental. Following these sections will be a broader discussion Tea 0.01% Following these sections will be a broader discussion Tea 0.01%

of the SME environment grounded in ICT adop- Cotton 10.3% of the SME environment grounded in ICT adop- Cotton 10.3% tion data and an analysis on how both types of tion data and an analysis on how both types of

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each commodity within the agricultural sector. each commodity within the agricultural sector. An informed industry strategy, targeting a specific FIGURE 23. WORLD COFFEE PRICE INDEX An informed industry strategy, targeting a specific FIGURE 23. WORLD COFFEE PRICE INDEX consumer market, can create sustainable advan- consumer market, can create sustainable advantages for agricultural products. Analysis and possi- 2.00 Annual Average C-Price NY tages for agricultural products. Analysis and possible strategies for coffee and cashews are listed 1.80 ble strategies for coffee and cashews are listed below. These provide a starting point for 1.60 below. These provide a starting point for 1.40 Tanzanians to make and test their own hypotheses 1.20 Tanzanians to make and test their own hypotheses regarding which markets to target and how best to 1.00 regarding which markets to target and how best to

execute distinct strategies. In each of these strate- US$/lb 0.80 execute distinct strategies. In each of these strategies, ICT can play a role in enhancing productivity 0.60 gies, ICT can play a role in enhancing productivity and facilitating the shift towards more competitive 0.40 and facilitating the shift towards more competitive 0.20 products. products. 0.00

991 992 993 994 998 999 000 001 002 003 004 1 1 1 1 1995 1996 1997 1 1 2 2 2 2 2 5.2.1 Coffee 5.2.1 Coffee Coffee, a major component of Tanzanian exports, Source: International Coffee Organization Coffee, a major component of Tanzanian exports, Source: International Coffee Organization is a sector that can have significant impact on the is a sector that can have significant impact on the rural population. The coffee industry in Tanzania rural population. The coffee industry in Tanzania provides employment to approximately 400,000 TCB controls the auction in Moshi, cups coffee to provides employment to approximately 400,000 TCB controls the auction in Moshi, cups coffee to families, as 95% of production is grown by small ensure quality and conducts farmer extension efforts. families, as 95% of production is grown by small ensure quality and conducts farmer extension efforts. holders.44 Regrettably, it is also a classic example of The coffee industry has taken steps towards access- holders.44 Regrettably, it is also a classic example of The coffee industry has taken steps towards access- a commodity sector that has undergone dramatic ing this higher priced specialty coffee market, which a commodity sector that has undergone dramatic ing this higher priced specialty coffee market, which upheaval in recent years, as seen by the price include the investment in primary processing sta- upheaval in recent years, as seen by the price include the investment in primary processing sta- volatility in Figure 23. A slight shift in supply, pri- tions, a restructuring of marketing polices to diversify volatility in Figure 23. A slight shift in supply, pri- tions, a restructuring of marketing polices to diversify marily driven by Vietnam and Brazil, caused the channels from the state-run auction and the success- marily driven by Vietnam and Brazil, caused the channels from the state-run auction and the success- market price for commodity coffee to fall spectacu- ful targeting of specialty buyers. market price for commodity coffee to fall spectacu- ful targeting of specialty buyers. larly.45 The effect in Tanzania was a drop in export larly.45 The effect in Tanzania was a drop in export receipts from US$ 76.6 million in 1999 to US$ Primary processing stations, also known as pulperies receipts from US$ 76.6 million in 1999 to US$ Primary processing stations, also known as pulperies 35.3 million in 2002.46 In commodity coffee, or washing stations, are required to treat and triage 35.3 million in 2002.46 In commodity coffee, or washing stations, are required to treat and triage Tanzania will never be a market-setting country; it coffee cherries in order to produce a consistently Tanzania will never be a market-setting country; it coffee cherries in order to produce a consistently will only be reactive, subject to ever decreasing, high-quality green coffee bean. TCB estimates that will only be reactive, subject to ever decreasing, high-quality green coffee bean. TCB estimates that volatile market prices. there are currently approximately 150 of these pro- volatile market prices. there are currently approximately 150 of these processing stations in Tanzania and has a national goal cessing stations in Tanzania and has a national goal Fortunately Tanzania recognizes this fact and is taking of reaching 500 stations in the coming years. Fortunately Tanzania recognizes this fact and is taking of reaching 500 stations in the coming years. several positive steps to compete more effectively. In Investment funds are being channeled by the GOT several positive steps to compete more effectively. In Investment funds are being channeled by the GOT the coffee market, a sustainable non-reactive strategy through the local governments within coffee the coffee market, a sustainable non-reactive strategy through the local governments within coffee is to improve quality so that sales are not dependent producing districts. is to improve quality so that sales are not dependent producing districts. on world commodity prices, but focus on higher on world commodity prices, but focus on higher quality coffee markets, including specialty coffee. TCB recently agreed to allow the direct export of quality coffee markets, including specialty coffee. TCB recently agreed to allow the direct export of Customers in these markets are sophisticated and premium, specialty coffee instead of the tradi- Customers in these markets are sophisticated and premium, specialty coffee instead of the tradi- demanding, but are willing to pay a premium from a tional channel through state-run auction. This demanding, but are willing to pay a premium from a tional channel through state-run auction. This supplier who can consistently provide a very high was an important decision as it allowed producers supplier who can consistently provide a very high was an important decision as it allowed producers quality coffee. to market their coffee directly to specialty coffee quality coffee. to market their coffee directly to specialty coffee buyers in the US and Europe. The purchasing buyers in the US and Europe. The purchasing National strategy in the coffee sector is coordinated dynamics of the specialty coffee market are very National strategy in the coffee sector is coordinated dynamics of the specialty coffee market are very by the Tanzania Coffee Board (TCB). Broadly, the different from those of commodity-grade coffee. by the Tanzania Coffee Board (TCB). Broadly, the different from those of commodity-grade coffee. TCB’s strategy is to increase both production and Coffee in the specialty market is commonly TCB’s strategy is to increase both production and Coffee in the specialty market is commonly quality, but importantly not to increase production referred to as “relationship coffee,” highlighting quality, but importantly not to increase production referred to as “relationship coffee,” highlighting at the expense of quality. Among its responsibilities, the importance of strong relationships between at the expense of quality. Among its responsibilities, the importance of strong relationships between

44 Baffes, John “Tanzania’s Coffee Sector: Constraints and Challenges in a Global Environment” The World Bank, Africa Region Working Paper no. 56, June 44 Baffes, John “Tanzania’s Coffee Sector: Constraints and Challenges in a Global Environment” The World Bank, Africa Region Working Paper no. 56, June 2003 2003 45 Coffee prices have recovered in late 2003 and early 2004, but this is due to short term conditions such as the effects of drought in Vietnam the tsunami in 45 Coffee prices have recovered in late 2003 and early 2004, but this is due to short term conditions such as the effects of drought in Vietnam the tsunami in Indonesia and lower production in Brazil. Indonesia and lower production in Brazil. 46 Bank of Tanzania, Economic Bulletin 46 Bank of Tanzania, Economic Bulletin

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the buyers and sellers/producers. In these rela- Vietnam as the largest producer of cashews in the the buyers and sellers/producers. In these rela- Vietnam as the largest producer of cashews in the tionships, buyers require consistently high quality world. Vietnam drove global production to increase tionships, buyers require consistently high quality world. Vietnam drove global production to increase coffee that is supplied reliably over time. nearly 70% from 1998 to 200349, see Figure 24. coffee that is supplied reliably over time. nearly 70% from 1998 to 200349, see Figure 24. Allowing coffee to be sold directly to these buyers Historically Tanzania’s cashew sector has been a Allowing coffee to be sold directly to these buyers Historically Tanzania’s cashew sector has been a gives producers the opportunity to nurture these leading foreign exchange earner, but the sector has gives producers the opportunity to nurture these leading foreign exchange earner, but the sector has relationships. plummeted from its number one ranking in export relationships. plummeted from its number one ranking in export receipts in 1998. Export receipts have fallen dra- receipts in 1998. Export receipts have fallen dra- The Association of Kilimanjaro Specialty Coffee matically by 47.7% from 1998 to 2003 from US$ The Association of Kilimanjaro Specialty Coffee matically by 47.7% from 1998 to 2003 from US$ Growers (AKSCG), also known under the trade 101.9 million to US$ 39.4 million.50 Tanzania, Growers (AKSCG), also known under the trade 101.9 million to US$ 39.4 million.50 Tanzania, name of KILICAFE, was the first recipient of a which was fourth in global production in 1998 and name of KILICAFE, was the first recipient of a which was fourth in global production in 1998 and direct-export license for coffee and, as such, was delivered 7.5% of the global supply, has fallen to direct-export license for coffee and, as such, was delivered 7.5% of the global supply, has fallen to able to control the sales process of their product. the sixth largest producer providing 4.8% of the able to control the sales process of their product. the sixth largest producer providing 4.8% of the They concentrated on increasing the quality and global supply. They concentrated on increasing the quality and global supply. value of their coffee, and soon sold 38% of their value of their coffee, and soon sold 38% of their coffee as specialty grade, in contrast to 2% in prior Though reliable price data is difficult to obtain for coffee as specialty grade, in contrast to 2% in prior Though reliable price data is difficult to obtain for years. 47 raw cashew nuts, as there is no international indica- years. 47 raw cashew nuts, as there is no international indica- tive price for cashews, it is clear that prices in tive price for cashews, it is clear that prices in Tanzania have fallen. The decline in export Tanzania have fallen. The decline in export BOX 2 AKSCG - KILICAFE receipts in Tanzania was experienced over a period BOX 2 AKSCG - KILICAFE receipts in Tanzania was experienced over a period when production in Tanzania fluctuated marginally when production in Tanzania fluctuated marginally (93,200 tons in 1998 to 121,900 tons in 2001 and (93,200 tons in 1998 to 121,900 tons in 2001 and AKSCG was formed in 2001 by 11 farmer groups in Northern 51 AKSCG was formed in 2001 by 11 farmer groups in Northern 51 Tanzania, with the facilitation of TechnoServe, a U.S.- based, back to 100,000 tons in 2003). The Tanzanian Tanzania, with the facilitation of TechnoServe, a U.S.- based, back to 100,000 tons in 2003). The Tanzanian non-profit development organization that assists entrepreneurs and cashew industry must change the way it competes non-profit development organization that assists entrepreneurs and cashew industry must change the way it competes other stakeholders in building competitive businesses and indus- other stakeholders in building competitive businesses and industries that directly benefit poor, rural communities in Africa and in the international cashew market or it will gener- tries that directly benefit poor, rural communities in Africa and in the international cashew market or it will gener- Latin America. The purpose of AKSCG is to locally produce and ate less and less profit from this important sector. Latin America. The purpose of AKSCG is to locally produce and ate less and less profit from this important sector. internationally market specialty coffee. The association provides internationally market specialty coffee. The association provides its members with a range of services, including quality and man- In short, Tanzania can no longer afford to send its its members with a range of services, including quality and man- In short, Tanzania can no longer afford to send its agement training, provision of credit facilities, and marketing sup- unprocessed cashew nuts to India for processing. agement training, provision of credit facilities, and marketing sup- unprocessed cashew nuts to India for processing. port. KILICAFE has grown in a short period to become port. KILICAFE has grown in a short period to become Tanzania’s largest coffee farmer association with 80 member Tanzania’s largest coffee farmer association with 80 member farmer groups representing more than 7,000 smallholder farmers In spite of these recent disappointing results, the farmer groups representing more than 7,000 smallholder farmers In spite of these recent disappointing results, the from three coffee growing regions. cashew sector presents opportunities for Tanzania from three coffee growing regions. cashew sector presents opportunities for Tanzania

KILICAFE has been successful in both production and marketing. to capture value through processing and increasing KILICAFE has been successful in both production and marketing. to capture value through processing and increasing Production of clean, or washed coffee, has grown significantly productivity. Only 10% of Tanzania’s production is Production of clean, or washed coffee, has grown significantly productivity. Only 10% of Tanzania’s production is since inception as shown by the graph below. Building on the currently processed in country, with the balance since inception as shown by the graph below. Building on the currently processed in country, with the balance increase in product quality, marketing efforts have led to much 52 increase in product quality, marketing efforts have led to much 52 higher prices for members of the organization. In the 2002/3 processed in India. According to experts quoted higher prices for members of the organization. In the 2002/3 processed in India. According to experts quoted season, members in the southern Tanzania region sold coffee at in the East African newspaper, a viable processing season, members in the southern Tanzania region sold coffee at in the East African newspaper, a viable processing prices 66% higher than non-members in the region, while the prices 66% higher than non-members in the region, while the northern group’s prices averaged 40% higher. Specialty buyers in industry in the country could create 30,000 direct northern group’s prices averaged 40% higher. Specialty buyers in industry in the country could create 30,000 direct the 2004/5 season include VolCafe, Gepa Fairtrade, Lister & jobs and generate US$ 40 million in incremental the 2004/5 season include VolCafe, Gepa Fairtrade, Lister & jobs and generate US$ 40 million in incremental Beisler, Peet’s Coffee & Tea and Starbucks Coffee. processing revenues annually.53 Unprocessed cashew Beisler, Peet’s Coffee & Tea and Starbucks Coffee. processing revenues annually.53 Unprocessed cashew Source: OTF Group interview, www.KILICAFE.com nuts from Tanzania currently trade at an average Source: OTF Group interview, www.KILICAFE.com nuts from Tanzania currently trade at an average f.o.b price of US$ 580 per ton in the world mar- f.o.b price of US$ 580 per ton in the world market, compared with an average of US$ 2,934 for a ket, compared with an average of US$ 2,934 for a ton of processed cashew nuts.54 ton of processed cashew nuts.54 5.2.2 Cashews 5.2.2 Cashews The world seems to be eating more cashews, given Tanzania has a factory infrastructure, albeit dated, The world seems to be eating more cashews, given Tanzania has a factory infrastructure, albeit dated, that cashews took first place in world nut crop pro- that it can leverage to enact a processing value- that cashews took first place in world nut crop pro- that it can leverage to enact a processing value- duction in 2003.48 But Tanzania is being left addition strategy. The GOT is taking some appro- duction in 2003.48 But Tanzania is being left addition strategy. The GOT is taking some appro- behind as the market shifted with the entrance of priate first steps in upgrading and privatizing the behind as the market shifted with the entrance of priate first steps in upgrading and privatizing the

47 USAID Tanzania Data Sheet 2004 47 USAID Tanzania Data Sheet 2004 48 http://uga.edu/fruit/cashew.htm 48 http://uga.edu/fruit/cashew.htm 49 FAOSTAT 49 FAOSTAT 50 Bank of Tanzania, Economic Bulletin 50 Bank of Tanzania, Economic Bulletin 51 FAOSTAT 51 FAOSTAT 52 Wakabi, Wairagala “African Cashews to Indian Factories: How the Continent Exports its Profits and Jobs”, The East African 20 December 20004 52 Wakabi, Wairagala “African Cashews to Indian Factories: How the Continent Exports its Profits and Jobs”, The East African 20 December 20004 53 Ibid 53 Ibid 54 Southern Africa Documentation and Cooperation Centre, Business Times article, “Tanzania loses billions in raw cashew exports”, 22 August 2003 54 Southern Africa Documentation and Cooperation Centre, Business Times article, “Tanzania loses billions in raw cashew exports”, 22 August 2003

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FIGURE 24. LEADING CASHEW PRODUCING COUNTRIES FIGURE 24. LEADING CASHEW PRODUCING COUNTRIES

35 Vietnam 30

25 India 20

15 Nigeria

% of world output 10 Brazil

5 Indonesia Tanzania 0 1998 1999 2000 2001 2002 2003 Year

Source: FAOSTAT Source: FAOSTAT

dormant cashew processing factories that have been dormant cashew processing factories that have been owned by the Cashew Board of Tanzania (CBT). BOX 3 Olam International owned by the Cashew Board of Tanzania (CBT). BOX 3 Olam International These factories range from those built in the 1960s These factories range from those built in the 1960s to early 1990s. One reason that these factories were Olam is a global supply chain manager of agricultural products to early 1990s. One reason that these factories were Olam is a global supply chain manager of agricultural products and food ingredients, operating in over 35 origin countries and and food ingredients, operating in over 35 origin countries and abandoned was that the type of technology used 50 destination markets. Olam focuses on fourteen products, abandoned was that the type of technology used 50 destination markets. Olam focuses on fourteen products, caused too much breakage. Processing cashew nuts including cocoa, coffee, cashew, peanuts, sesame, rice and teak caused too much breakage. Processing cashew nuts including cocoa, coffee, cashew, peanuts, sesame, rice and teak wood. Within the cashew industry, Olam is the single largest wood. Within the cashew industry, Olam is the single largest involves breaking the cashew nut to access the ker- integrated global player and has been operating in Tanzania involves breaking the cashew nut to access the ker- integrated global player and has been operating in Tanzania nel, the edible portion. Kernels that are broken since 1994. nel, the edible portion. Kernels that are broken since 1994. during the breaking process are less valuable than during the breaking process are less valuable than Olam’s processing capacity in Tanzania is 10,000 tons per year, Olam’s processing capacity in Tanzania is 10,000 tons per year, unbroken kernels. The loss of value per break is which it satisfies with local supply. Its factory is certified for organ- unbroken kernels. The loss of value per break is which it satisfies with local supply. Its factory is certified for organ- approximately 50%. ic cashews with traceability to over 1,500 individual farms in five approximately 50%. ic cashews with traceability to over 1,500 individual farms in five villages. Olam provides the farmers with inputs who sell at desig- villages. Olam provides the farmers with inputs who sell at desig- nated buying centers. Each farmer registers with Olam, and the nated buying centers. Each farmer registers with Olam, and the There are two dominant technologies employed to cashew nuts from farmers are kept in discrete lots at the factory. There are two dominant technologies employed to cashew nuts from farmers are kept in discrete lots at the factory. Buyers of processed cashew nuts from the EU and USA depend on Buyers of processed cashew nuts from the EU and USA depend on break cashew nuts. One is a capital intensive, accurate traceability information provided by Olam and its certify- break cashew nuts. One is a capital intensive, accurate traceability information provided by Olam and its certify- mechanized process that is primarily used in Brazil ing agency, which keeps a database of Olam’s product. mechanized process that is primarily used in Brazil ing agency, which keeps a database of Olam’s product. and was installed in the older Tanzania processing and was installed in the older Tanzania processing Source: OTF Group interview, www.olamonline.com Source: OTF Group interview, www.olamonline.com centers. The second is a much more labor intensive centers. The second is a much more labor intensive procedure, but leads to less kernel breakage, result- procedure, but leads to less kernel breakage, resulting in a higher value product. Newer processing ing in a higher value product. Newer processing centers in Tanzania use this methodology; one firm centers in Tanzania use this methodology; one firm that does is Olam International. This technology cashews from Tanzania before they export them to that does is Olam International. This technology cashews from Tanzania before they export them to seems to be the most appropriate for Tanzania as it western markets. The upgrade of technology, how- seems to be the most appropriate for Tanzania as it western markets. The upgrade of technology, how- not only results in a higher value product, but is ever, will require investment in skills training for not only results in a higher value product, but is ever, will require investment in skills training for also labor intensive, creating much needed employ- workers in the processing centers. also labor intensive, creating much needed employ- workers in the processing centers. ment. If the old factories are refitted with this ment. If the old factories are refitted with this technology it would be possible to process almost 5.2.3 Targeted ICT Interventions technology it would be possible to process almost 5.2.3 Targeted ICT Interventions all of the country’s production given the current The current role of ICT in the local coffee and all of the country’s production given the current The current role of ICT in the local coffee and production levels and installed capacity. If processors cashew industries is limited, although there are production levels and installed capacity. If processors cashew industries is limited, although there are in Tanzania are as efficient and productive as some opportunities in production and marketing if in Tanzania are as efficient and productive as some opportunities in production and marketing if Indian factories, they can be more cost competitive. Tanzania continues to support the movement into Indian factories, they can be more cost competitive. Tanzania continues to support the movement into Indian importers now have to cover transport costs high quality markets for coffee and value added Indian importers now have to cover transport costs high quality markets for coffee and value added (approximately US$ 100/ton) to ship unprocessed processing for cashews. Some of the ICT solutions (approximately US$ 100/ton) to ship unprocessed processing for cashews. Some of the ICT solutions

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suggested for coffee and cashews may cross over to for example, highlights traceability of its Tanzanian suggested for coffee and cashews may cross over to for example, highlights traceability of its Tanzanian other industries. Applicability will depend on the factory in corporate marketing. Generally, traceabil- other industries. Applicability will depend on the factory in corporate marketing. Generally, traceabil- dynamics of domestic production and the interna- ity refers to “the ability to document a history of dynamics of domestic production and the interna- ity refers to “the ability to document a history of tional market. the origin, participants, steps and handling involved tional market. the origin, participants, steps and handling involved in the production of a food or feed product”.55 The in the production of a food or feed product”.55 The need for traceability has been driven by consumer need for traceability has been driven by consumer Production demand. Consumers are increasingly interested in Production demand. Consumers are increasingly interested in As mentioned earlier, processing centers are required the source of their food, as evidenced by the spike As mentioned earlier, processing centers are required the source of their food, as evidenced by the spike in order to produce specialty coffee. Though ICT in consumption of certified organic agricultural in order to produce specialty coffee. Though ICT in consumption of certified organic agricultural systems are not necessary in the operation of the products. More sophisticated consumers, distribu- systems are not necessary in the operation of the products. More sophisticated consumers, distribu- pulperies themselves, ICT can add value before the tors and regulatory bodies also want information pulperies themselves, ICT can add value before the tors and regulatory bodies also want information pulperies are even constructed. Tanzania’s neighbor, on agricultural inputs such as fertilizer and pesti- pulperies are even constructed. Tanzania’s neighbor, on agricultural inputs such as fertilizer and pesti- Rwanda, has followed a similar quality framework for cides, as well as processing and transformation pro- Rwanda, has followed a similar quality framework for cides, as well as processing and transformation pro- developing a competitive coffee industry. Rwanda is cedures. Incidents such as Mad Cow disease high- developing a competitive coffee industry. Rwanda is cedures. Incidents such as Mad Cow disease high- using ICT to strategically locate coffee washing light the need for traceability in order to prevent using ICT to strategically locate coffee washing light the need for traceability in order to prevent health hazards from spreading across geographical health hazards from spreading across geographical BOX 4 Embedding technology in a regions. The global debate on genetically modified BOX 4 Embedding technology in a regions. The global debate on genetically modified coffee bean foods (GMF) is another driver in the proliferation coffee bean foods (GMF) is another driver in the proliferation of traceability systems. of traceability systems.

In an effort to assist in the implementation of the national strategy, In an effort to assist in the implementation of the national strategy, a geographical information system (GIS) effort was initiated ICT can play a major role in each of these demand a geographical information system (GIS) effort was initiated ICT can play a major role in each of these demand among The University of Rwanda, The Ministry of Agriculture, the components of traceability. Electronic tracking sys- among The University of Rwanda, The Ministry of Agriculture, the components of traceability. Electronic tracking sys- Coffee Board and the PEARL project. The GIS has two primary Coffee Board and the PEARL project. The GIS has two primary objectives: first, to ensure the strategic placement of the new tems for products are currently in use, and with the objectives: first, to ensure the strategic placement of the new tems for products are currently in use, and with the washing stations near coffee producers, water sources, electricity appropriate software, much product data can be washing stations near coffee producers, water sources, electricity appropriate software, much product data can be and effective means of transportation. It is important when deter- and effective means of transportation. It is important when determining a site for a coffee washing station that it be located near captured and transmitted to ensure that members mining a site for a coffee washing station that it be located near captured and transmitted to ensure that members a critical mass of coffee farmers as coffee cherries should be of the product supply chain can communicate for- a critical mass of coffee farmers as coffee cherries should be of the product supply chain can communicate for- processed within a few hours of harvest to achieve a high quality wards and backwards. GIS systems such as the one processed within a few hours of harvest to achieve a high quality wards and backwards. GIS systems such as the one product. The processing operations also use a large amount of product. The processing operations also use a large amount of water that must be of a high quality. Lake and river water are Rwanda built, as well as global positioning systems water that must be of a high quality. Lake and river water are Rwanda built, as well as global positioning systems not appropriate, so it is critical to be located near a quality (GPS), allow data to be accessed remotely if it is not appropriate, so it is critical to be located near a quality (GPS), allow data to be accessed remotely if it is source. Finally, to keep power costs low, washing stations should source. Finally, to keep power costs low, washing stations should be near a reliable power supply, preferably the national grid not tracked through other means. be near a reliable power supply, preferably the national grid not tracked through other means. rather than expensive generators. rather than expensive generators.

The second objective is to use soil and weather data to customize The second objective is to use soil and weather data to customize fertilizers and plan the replacement of older coffee trees with new Marketing fertilizers and plan the replacement of older coffee trees with new Marketing varieties. Though a small country, Rwanda’s mountainous topog- The role of ICT in the marketing strategy of a firm varieties. Though a small country, Rwanda’s mountainous topog- The role of ICT in the marketing strategy of a firm raphy and intensive farming practices lead to a wide variation in raphy and intensive farming practices lead to a wide variation in weather patterns and soil composition. To optimize yields, appro- depends heavily on the market dynamics and weather patterns and soil composition. To optimize yields, appro- depends heavily on the market dynamics and priate fertilizers should be applied to certain areas. As the sophistication of the industry. For example, players priate fertilizers should be applied to certain areas. As the sophistication of the industry. For example, players Coffee Board and the University of Rwanda test and develop new Coffee Board and the University of Rwanda test and develop new varieties of coffee trees, the soil and weather data will determine in the local fishing industry in Zanzibar use their varieties of coffee trees, the soil and weather data will determine in the local fishing industry in Zanzibar use their where certain types should be planted. cell phones to compare market prices in Zanzibar where certain types should be planted. cell phones to compare market prices in Zanzibar

Source: OTF Group interview, www.cgisnur.org and the mainland to determine where they should Source: OTF Group interview, www.cgisnur.org and the mainland to determine where they should sell their catch.56 The daily harvesting and almost sell their catch.56 The daily harvesting and almost immediate perishability of their product requires immediate perishability of their product requires stations throughout the country. As the GOT sup- these producers to know market prices instantly to stations throughout the country. As the GOT sup- these producers to know market prices instantly to ports the construction of washing stations through capture the benefits of unfilled market demand. ports the construction of washing stations through capture the benefits of unfilled market demand. funding to coffee producing districts, Tanzania could funding to coffee producing districts, Tanzania could benefit from a similar sighting approach. ICT can be instrumental in website marketing in benefit from a similar sighting approach. ICT can be instrumental in website marketing in more sophisticated industry strategies, though not more sophisticated industry strategies, though not Traceability has become an increasingly important necessarily for direct sales to export markets. For Traceability has become an increasingly important necessarily for direct sales to export markets. For issue for global agribusiness and will increasingly example, in the specialty coffee market it is impor- issue for global agribusiness and will increasingly example, in the specialty coffee market it is impor- apply to both coffee and cashews—note that Olam, tant for producers to build strong relationships with apply to both coffee and cashews—note that Olam, tant for producers to build strong relationships with

55 USDA Advisory Committee “Global Traceability and Labeling Requirements for Agricultural Biotechnology-Derived Products: Impacts and Implications for 55 USDA Advisory Committee “Global Traceability and Labeling Requirements for Agricultural Biotechnology-Derived Products: Impacts and Implications for the United States the United States 56 Click Online, Tanzania Mobile, BBC World, July 26, 2005 56 Click Online, Tanzania Mobile, BBC World, July 26, 2005

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importers and roasters. These importers and roasters ing model, since it would potentially involve more importers and roasters. These importers and roasters ing model, since it would potentially involve more are not inclined to purchase supply over a website, players. Under the scope of work of the East African are not inclined to purchase supply over a website, players. Under the scope of work of the East African but end use consumers of higher end coffees do Fine Coffees Association (EAFCA), there might be but end use consumers of higher end coffees do Fine Coffees Association (EAFCA), there might be place a premium on knowing where their coffee an opportunity to link the auctions of these coun- place a premium on knowing where their coffee an opportunity to link the auctions of these coun- comes from and whom their purchase benefits. In tries via the internet. Doing so would increase market comes from and whom their purchase benefits. In tries via the internet. Doing so would increase market an effort to better inform consumers, coffee produc- efficiencies across East Africa, allowing producers in an effort to better inform consumers, coffee produc- efficiencies across East Africa, allowing producers in ers in Tanzania could develop websites with local one country to supply product to buyers in another ers in Tanzania could develop websites with local one country to supply product to buyers in another information on the benefits their coffee has provided country in which there may be a shortage, either information on the benefits their coffee has provided country in which there may be a shortage, either to communities. Coffee drinkers could see photos locally or beyond African borders. to communities. Coffee drinkers could see photos locally or beyond African borders. of the producers, coffee washing stations that of the producers, coffee washing stations that process the coffee, discover the region in which the ICT can also play a role in assisting Tanzanian agricul- process the coffee, discover the region in which the ICT can also play a role in assisting Tanzanian agricul- coffee is grown and learn how the coffee strategy tural industries and firms in conducting market coffee is grown and learn how the coffee strategy tural industries and firms in conducting market has increased the prosperity of coffee farmers and research. The shift to processing cashews, for example, has increased the prosperity of coffee farmers and research. The shift to processing cashews, for example, the people employed by the coffee washing stations. should be informed by the identification of demands the people employed by the coffee washing stations. should be informed by the identification of demands in markets that Tanzania has not historically targeted. in markets that Tanzania has not historically targeted. The specialty coffee market is moving towards This also applies to new entrants into the specialty The specialty coffee market is moving towards This also applies to new entrants into the specialty adopting an appellation framework similar to that coffee market, as well as any agricultural sector that is adopting an appellation framework similar to that coffee market, as well as any agricultural sector that is of the wine industry. Coffee connoisseurs can looking to move up the value chain or target new of the wine industry. Coffee connoisseurs can looking to move up the value chain or target new detect flavor variances from relatively small geo- buyers. As the market segments that could be served detect flavor variances from relatively small geo- buyers. As the market segments that could be served graphic regions. This is due to differences in soil may vary, so will their preferences, which should graphic regions. This is due to differences in soil may vary, so will their preferences, which should composition, rainfall, plant varieties and other cli- determine how the industry organizes its activities. composition, rainfall, plant varieties and other cli- determine how the industry organizes its activities. matic or input factors. To satisfy these very Since retailers from developed countries are most matic or input factors. To satisfy these very Since retailers from developed countries are most demanding customers, specialty coffee marketers interested in traceability of products, long-term rela- demanding customers, specialty coffee marketers interested in traceability of products, long-term rela- will increasingly be identifying the unique charac- tionships, and product range from their suppliers,57 will increasingly be identifying the unique charac- tionships, and product range from their suppliers,57 teristics of coffee growing areas and highlighting for example, effectively serving these markets means teristics of coffee growing areas and highlighting for example, effectively serving these markets means this information when communicating with con- that Tanzanian suppliers must be able to meet these this information when communicating with con- that Tanzanian suppliers must be able to meet these sumers. The GIS and traceability systems illustrated criteria. If they do not, other countries will. sumers. The GIS and traceability systems illustrated criteria. If they do not, other countries will. in the Production section can be utilized by coffee in the Production section can be utilized by coffee growers to ensure that this differentiating informa- growers to ensure that this differentiating information is provided to buyers. tion is provided to buyers.

Though a window of opportunity has been opened 5.3 MINERALS AND MINING Though a window of opportunity has been opened 5.3 MINERALS AND MINING for specialty coffee producers in Tanzania, the vast for specialty coffee producers in Tanzania, the vast majority of coffee sales still take place in the state- Tanzania is endowed with vast mineral wealth: gold, majority of coffee sales still take place in the state- Tanzania is endowed with vast mineral wealth: gold, run auction in Moshi. Even for the progressive base metals, diamonds, ferrous minerals and a wide run auction in Moshi. Even for the progressive base metals, diamonds, ferrous minerals and a wide KILICAFE, the primary channel for coffee sales variety of gemstones, including tanzanite, a stone only KILICAFE, the primary channel for coffee sales variety of gemstones, including tanzanite, a stone only continues to be the state auction, which accounts found in Tanzania. The nation’s exports are increas- continues to be the state auction, which accounts found in Tanzania. The nation’s exports are increas- for 90% of sales. The auction process is relatively ingly dominated by mining, growing from US$ 73 for 90% of sales. The auction process is relatively ingly dominated by mining, growing from US$ 73 simple. Buyers are sent samples of coffee that are million in 1999 to more than US$ 540 million in simple. Buyers are sent samples of coffee that are million in 1999 to more than US$ 540 million in cataloged and displayed on an electronic board. 2003, a remarkable compound annual growth rate of cataloged and displayed on an electronic board. 2003, a remarkable compound annual growth rate of Buyers make bids by pressing buttons, which 49.2%. This is more striking when compared to the Buyers make bids by pressing buttons, which 49.2%. This is more striking when compared to the increase their bid price by US$ 1.00, 0.60 or 0.40. compound annual growth of 4.6% for all other increase their bid price by US$ 1.00, 0.60 or 0.40. compound annual growth of 4.6% for all other exports combined over the same time period. exports combined over the same time period. At this time there is no internet-based auction pro- At this time there is no internet-based auction procedure and constructing one for use solely in The mining and minerals sector experienced a boom cedure and constructing one for use solely in The mining and minerals sector experienced a boom Tanzania may not make economic sense. An elec- in growth in the 1980’s when the State Mining Tanzania may not make economic sense. An elec- in growth in the 1980’s when the State Mining tronic-based auction that linked nearby countries Company (STAMICO) monopoly was broken up, tronic-based auction that linked nearby countries Company (STAMICO) monopoly was broken up, that also use auctions such as Kenya and Ethiopia and any Tanzanian was allowed to register a claim that also use auctions such as Kenya and Ethiopia and any Tanzanian was allowed to register a claim could lead to a more efficient and competitive pric- and sell minerals.58 The minerals sector then benefited could lead to a more efficient and competitive pric- and sell minerals.58 The minerals sector then benefited

57 OTF Group research 57 OTF Group research 58 Economic and Social Research Foundation and International Business Initiatives Corp., Tanzania’s Precious Minerals Boom: Issues in Mining and Marketing. 58 Economic and Social Research Foundation and International Business Initiatives Corp., Tanzania’s Precious Minerals Boom: Issues in Mining and Marketing. January 2001. January 2001.

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TABLE 5. Minerals production TABLE 5. Minerals production

Selected Minerals Selected Minerals (tons thousands) 1999 2000 2001 2002 2003 (tons thousands) 1999 2000 2001 2002 2003 Gold 4,890 15,060 30,088 34,065 45,299 Gold 4,890 15,060 30,088 34,065 45,299

Diamonds (carats) 235 354 254 213 237 Diamonds (carats) 235 354 254 213 237

Gemstones 95 151 97 113 n/a Gemstones 95 151 97 113 n/a

Source: Planning Commission -Economic Source: Planning Commission -Economic Survey, Bank of Tanzania - Economic Bulletin Survey, Bank of Tanzania - Economic Bulletin & Economic Survey 2002 & Economic Survey 2002

from legal reform and the adoption of a revised min- from legal reform and the adoption of a revised mining policy in 1997 that included domestic and export migrate to more complex and valuable products, ing policy in 1997 that included domestic and export migrate to more complex and valuable products, tax relief and investment incentives. This revival has thereby increasing its global competitiveness. The tax relief and investment incentives. This revival has thereby increasing its global competitiveness. The helped Tanzania become the fourth largest gold pro- next section explores this potential. While gemstones helped Tanzania become the fourth largest gold pro- next section explores this potential. While gemstones ducer in Sub-Saharan Africa, behind South Africa, account for a smaller percentage of exports than gold, ducer in Sub-Saharan Africa, behind South Africa, account for a smaller percentage of exports than gold, Ghana and Mali.59 Gold has been the main driver of the value of this sector is likely to be greatly underes- Ghana and Mali.59 Gold has been the main driver of the value of this sector is likely to be greatly underes- mineral exports, as evidenced by Table 5. Gold timated due to smuggling, and holds significant mineral exports, as evidenced by Table 5. Gold timated due to smuggling, and holds significant exports in 2003 were US$ 499 million and produc- opportunity due to imminent regulatory changes. exports in 2003 were US$ 499 million and produc- opportunity due to imminent regulatory changes. tion grew at an astounding compound annual growth tion grew at an astounding compound annual growth rate of 56.1% from 1999 to 2003.60 5.3.1 Gemstone Industry Outlook rate of 56.1% from 1999 to 2003.60 5.3.1 Gemstone Industry Outlook Tanzania possesses a rich portfolio of gemstones, Tanzania possesses a rich portfolio of gemstones, Though the government’s role in jumpstarting the including tanzanite, ruby, sapphire, rhodolite, Though the government’s role in jumpstarting the including tanzanite, ruby, sapphire, rhodolite, mining sector is a positive example for other sectors, emerald, amethyst, chrysoprase, peridot and tour- mining sector is a positive example for other sectors, emerald, amethyst, chrysoprase, peridot and tour- the sector’s spectacular performance in terms of maline. Tanzanite is of particular interest, as it is the sector’s spectacular performance in terms of maline. Tanzanite is of particular interest, as it is exports and production must be tempered against unique to Tanzania and of greater value than most exports and production must be tempered against unique to Tanzania and of greater value than most its impact on increasing the prosperity of the aver- gemstones. In 2001, tanzanite export receipts only its impact on increasing the prosperity of the aver- gemstones. In 2001, tanzanite export receipts only age citizen. The GOT has certainly benefited from totaled $16 million. This number greatly underesti- age citizen. The GOT has certainly benefited from totaled $16 million. This number greatly underesti- the increase in mining with tax revenues from the mates the value of the tanzanite industry, as ram- the increase in mining with tax revenues from the mates the value of the tanzanite industry, as ram- sector growing from US$ 4.5 million in 1997 to pant smuggling is alleged to account for 90% of sector growing from US$ 4.5 million in 1997 to pant smuggling is alleged to account for 90% of US$ 51.7 million in 2002.61 In order for mining to production export.62 Abolishing high export taxes US$ 51.7 million in 2002.61 In order for mining to production export.62 Abolishing high export taxes benefit the general population, however, the indus- could help to greatly reduce this amount. benefit the general population, however, the indus- could help to greatly reduce this amount. try must move up market and include new products try must move up market and include new products and services with greater value added to them. This figure of $16 million also grossly underesti- and services with greater value added to them. This figure of $16 million also grossly underesti- Countries only benefit from extractive industries mates the potential value of the gemstone industry. Countries only benefit from extractive industries mates the potential value of the gemstone industry. such as mining for the fixed period of time equal to The majority of gemstone exports consist of uncut such as mining for the fixed period of time equal to The majority of gemstone exports consist of uncut the country’s reserves, leaving ghost towns through- stones, absent lapidary or jewelry creation. Due to the country’s reserves, leaving ghost towns through- stones, absent lapidary or jewelry creation. Due to out the countryside when the wells or in this case the long history of illicit trade in gemstones, it is out the countryside when the wells or in this case the long history of illicit trade in gemstones, it is mineral veins run dry. The increase of Tanzania’s difficult to estimate the total market value or mineral veins run dry. The increase of Tanzania’s difficult to estimate the total market value or mining receipts has also overshadowed the urgency potential. However, experts speculate that currently mining receipts has also overshadowed the urgency potential. However, experts speculate that currently of effectively growing other economic sectors. at least 60% of Tanzania’s gemstones exit illegally of effectively growing other economic sectors. at least 60% of Tanzania’s gemstones exit illegally overland, mainly through Kenya, for lapidary and overland, mainly through Kenya, for lapidary and In thinking about strategic reinvestment of mining export.63 Figures such as these confirm that In thinking about strategic reinvestment of mining export.63 Figures such as these confirm that revenues, the gemstones sector is an area within the Tanzania’s gemstone strategy only captures a small revenues, the gemstones sector is an area within the Tanzania’s gemstone strategy only captures a small Mining & Minerals industry that has the potential to percentage of end products’ value. Mining & Minerals industry that has the potential to percentage of end products’ value.

59 The Economist Intelligence Unit, Country Report: Tanzania. London, UK. February 2005 59 The Economist Intelligence Unit, Country Report: Tanzania. London, UK. February 2005 60 The Economist Intelligence Unit, Country Report: Tanzania. London, UK. February 2005 60 The Economist Intelligence Unit, Country Report: Tanzania. London, UK. February 2005 61 Mwalyosi, Raphael B.B., “Impact Assessment and the Mining Industry: Perspectives from Tanzania, April 2004 61 Mwalyosi, Raphael B.B., “Impact Assessment and the Mining Industry: Perspectives from Tanzania, April 2004 62 Block, Robert and Daniel Pearl. “Underground Trade. Much Smuggled Gem Called Tanzanite Helps Bin Laden Supporters.” The Wall Street Journal, 62 Block, Robert and Daniel Pearl. “Underground Trade. Much Smuggled Gem Called Tanzanite Helps Bin Laden Supporters.” The Wall Street Journal, November 16, 2001 November 16, 2001 63 Economic and Social Research Foundation 63 Economic and Social Research Foundation

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The current dynamics present tremendous oppor- Box 5 for a further explanation of this potential The current dynamics present tremendous oppor- Box 5 for a further explanation of this potential tunities for forward integration. Stable diamond, dynamic. tunities for forward integration. Stable diamond, dynamic. tanzanite and other gemstone extraction could be tanzanite and other gemstone extraction could be coupled with the gold mining to build an interna- The present Tanzanian lapidary sector is extremely coupled with the gold mining to build an interna- The present Tanzanian lapidary sector is extremely tionally competitive lapidary and jewelry industry. small relative to the size of the industry, and is tionally competitive lapidary and jewelry industry. small relative to the size of the industry, and is Unlike gold mining, gemstones in Tanzania are focused on cutting larger gemstones (1 gram or Unlike gold mining, gemstones in Tanzania are focused on cutting larger gemstones (1 gram or primarily sourced by small-scale operations that greater). The majority of lapidary takes place in primarily sourced by small-scale operations that greater). The majority of lapidary takes place in are domestically owned, so the benefits of success- Arusha, with stones then exported or sold on the are domestically owned, so the benefits of success- Arusha, with stones then exported or sold on the fully moving up the value chain in lapidary and local market. Although the compensation for skilled fully moving up the value chain in lapidary and local market. Although the compensation for skilled jewelry would have a significant impact on the lapidary is competitive, there are few workers jewelry would have a significant impact on the lapidary is competitive, there are few workers local population. trained in the lapidary process, as local demand is local population. trained in the lapidary process, as local demand is limited. With the regulatory change in 2006, the limited. With the regulatory change in 2006, the 5.3.2 Gemstone Lapidary local market may grow exponentially. This would 5.3.2 Gemstone Lapidary local market may grow exponentially. This would The first step in migrating towards higher value help to fuel demand for skilled labor and legislate The first step in migrating towards higher value help to fuel demand for skilled labor and legislate products is investment in the lapidary industry. an opportunity for Tanzania to forward integrate in products is investment in the lapidary industry. an opportunity for Tanzania to forward integrate in More than 98% of gemstones exported through the the value chain, capturing—rather than exporting— More than 98% of gemstones exported through the the value chain, capturing—rather than exporting— formal economy are shipped in uncut form to over- the wealth created in the lapidary process. formal economy are shipped in uncut form to over- the wealth created in the lapidary process. seas lapidary and polishing centers. India receives seas lapidary and polishing centers. India receives over 50% of these exports. This massive exporta- over 50% of these exports. This massive exporta- tion of rough stones is not driven by a lack of local tion of rough stones is not driven by a lack of local expertise or in a desire to capitalize on low-cost expertise or in a desire to capitalize on low-cost labor overseas. This trend is directly attributable to BOX 5 The Gemological & Jewelry labor overseas. This trend is directly attributable to BOX 5 The Gemological & Jewelry the regulatory environment. The current Value- Vocational Training Centre the regulatory environment. The current Value- Vocational Training Centre Added Tax on gemstones is 20%. Thus, it is advan- Added Tax on gemstones is 20%. Thus, it is advan- tageous from a tax perspective to ship uncut stones The Gemological & Jewelry Vocational Training Centre (Centre), tageous from a tax perspective to ship uncut stones The Gemological & Jewelry Vocational Training Centre (Centre), located in Arusha, is Tanzania’s current hub of gemstone lapidary located in Arusha, is Tanzania’s current hub of gemstone lapidary of undetermined and presumably low value, rather and training. The Centre offers a three-month course in lapidary, of undetermined and presumably low value, rather and training. The Centre offers a three-month course in lapidary, than export cut, higher value stones.64 This VAT during which students are first taught to cut the low value stones. than export cut, higher value stones.64 This VAT during which students are first taught to cut the low value stones. Subsequently, those who acquire adequate skills, are trained to Subsequently, those who acquire adequate skills, are trained to policy is partially responsible for the lack of devel- cut tanzanite. The average size of stones cut in the Centre is 1 policy is partially responsible for the lack of devel- cut tanzanite. The average size of stones cut in the Centre is 1 opment of a sophisticated local lapidary sector, as gram. The majority of lapidary performed by the Centre is com- opment of a sophisticated local lapidary sector, as gram. The majority of lapidary performed by the Centre is com- missioned by dealers who buy stones from the miners, and then missioned by dealers who buy stones from the miners, and then there is little demand for such expertise prior to once cut, sell them to jewelers. there is little demand for such expertise prior to once cut, sell them to jewelers. export. This regulatory environment also creates export. This regulatory environment also creates disincentives for transparency and compliance, In an average year, the Centre trains 150 students, who pay US$ disincentives for transparency and compliance, In an average year, the Centre trains 150 students, who pay US$ 350 each to participate in a 3-month course, after which they can 350 each to participate in a 3-month course, after which they can which contribute to gemstone smuggling. command a salary of US$ 150 – 500 per month. The return on which contribute to gemstone smuggling. command a salary of US$ 150 – 500 per month. The return on investment in training is substantial, but the industry has historically investment in training is substantial, but the industry has historically outsourced much of the lapidary process to India and Sri Lanka to outsourced much of the lapidary process to India and Sri Lanka to A law due to take effect in January 2006 will ban avoid heavy tariffs. However, with the change in legislation, as of A law due to take effect in January 2006 will ban avoid heavy tariffs. However, with the change in legislation, as of exports of rough gemstones, a move that will effec- January 1, 2006, market demand will increase exponentially, cre- exports of rough gemstones, a move that will effec- January 1, 2006, market demand will increase exponentially, cre- tively legislate forward integration. This regulatory ating tremendous need for labor skilled in the lapidary process. tively legislate forward integration. This regulatory ating tremendous need for labor skilled in the lapidary process. change can act as a catalyst in stimulating significant This presents a prime opportunity for the GOT to encourage for- change can act as a catalyst in stimulating significant This presents a prime opportunity for the GOT to encourage for- growth in domestic lapidary. A hint of caution must ward integration in the mining sector by providing strategic support growth in domestic lapidary. A hint of caution must ward integration in the mining sector by providing strategic support to the lapidary sector. The Gemological & Jewelry Vocational to the lapidary sector. The Gemological & Jewelry Vocational also be mentioned in regards to this legislation. Training Centre is well positioned to assume a leadership role as also be mentioned in regards to this legislation. Training Centre is well positioned to assume a leadership role as Though the government is well intentioned and has the lapidary sector expands domestically next year, and to play a Though the government is well intentioned and has the lapidary sector expands domestically next year, and to play a significant role in training and facilitating the forward integration significant role in training and facilitating the forward integration an important role in jumpstarting a nascent industry, process in the mining industry. However, substantial human and an important role in jumpstarting a nascent industry, process in the mining industry. However, substantial human and laws such as these can have negative consequences. financial resources will be required to expand lapidary capacity laws such as these can have negative consequences. financial resources will be required to expand lapidary capacity For instance, although the lapidary industry may and accommodate growing demand. Unless the GOT supports For instance, although the lapidary industry may and accommodate growing demand. Unless the GOT supports industry leaders and associations such as this Centre and TAMIDA industry leaders and associations such as this Centre and TAMIDA benefit, it is also possible that the amount of rough in rapidly improving the expertise and size of its lapidary labor benefit, it is also possible that the amount of rough in rapidly improving the expertise and size of its lapidary labor gemstones smuggled out of the country may increase, force, the potential of this sector will be squandered, further encour- gemstones smuggled out of the country may increase, force, the potential of this sector will be squandered, further encouraging elicit export of gemstones for lapidary outside of Tanzania. aging elicit export of gemstones for lapidary outside of Tanzania. as firms are not able to adequate prepare for this for- as firms are not able to adequate prepare for this forward integration, and even fear bankruptcy as their Source: OTF Group Interview ward integration, and even fear bankruptcy as their Source: OTF Group Interview main business exporting uncut stones disappears. See main business exporting uncut stones disappears. See

64 Yager, Thomas R. “The Mineral Industry of Tanzania,” U.S. Geological Survey Minerals Yearbook, 2003 64 Yager, Thomas R. “The Mineral Industry of Tanzania,” U.S. Geological Survey Minerals Yearbook, 2003

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FIGURE 25. TANZANITE VALUE CHAIN AND POTENTIAL ICT IMPROVEMENTS FIGURE 25. TANZANITE VALUE CHAIN AND POTENTIAL ICT IMPROVEMENTS

Gemstone Value Chain

Mining Lapidary Jewelry

ICT Interventions

E-procurement for sourcing Electronic recordkeeping for cost CAD CAM software to enhance equipment & spare parts reduction in accounting jewelry design Satellite communication between Tracking system to trace origin of ICT-enabled training courses to mine and HQ: mobile fax and gemstones and prevent boycott rapidly increase the pool of telephony skilled jewelers Electronic database networking to Electronic materials to facilitate share technical, maintenance and dissemination of training E-commerce to reach new management specialists materials customers and markets

Source: The OTF Group. Source: The OTF Group.

5.3.3 Targeted ICT Interventions from officially sanctioned sources. This traceability 5.3.3 Targeted ICT Interventions from officially sanctioned sources. This traceability As we see in Figure 25, ICT could help to transi- system centers on the licensing of all tanzanite min- As we see in Figure 25, ICT could help to transi- system centers on the licensing of all tanzanite min- tion Tanzania to a larger scale lapidary and jewelry ers and dealers, as well as the issuance of “certificates tion Tanzania to a larger scale lapidary and jewelry ers and dealers, as well as the issuance of “certificates industry that captures greater product value. of origin” to verify that each piece of tanzanite industry that captures greater product value. of origin” to verify that each piece of tanzanite comes from legal sources. comes from legal sources.

Traceability Systems Improving traceability and transparency is one area Traceability Systems Improving traceability and transparency is one area Tanzanite, one of Tanzania’s most precious gem- in which ICT could enhance the gemstone sector. Tanzanite, one of Tanzania’s most precious gem- in which ICT could enhance the gemstone sector. stones, recently came under fire when in 2002 The Electronic databases and cataloging could ease the stones, recently came under fire when in 2002 The Electronic databases and cataloging could ease the Wall Street Journal alleged that it was being smug- burden of accounting for all transactions and has- Wall Street Journal alleged that it was being smug- burden of accounting for all transactions and has- gled illegally to Dubai and other locations to ten the bureaucratic process. gled illegally to Dubai and other locations to ten the bureaucratic process. finance Al-Qaeda’s terrorist network. While these finance Al-Qaeda’s terrorist network. While these allegations were never verified, the collateral dam- allegations were never verified, the collateral dam- age caused by this allegation was devastating to the Computer Aided Design / Computer Aided age caused by this allegation was devastating to the Computer Aided Design / Computer Aided tanzanite industry. Not only were the country and Manufacturing (CAD CAM Software) tanzanite industry. Not only were the country and Manufacturing (CAD CAM Software) gemstone’s images tarnished, but Tiffany and Co., Jewelry industries in countries such as Sri Lanka are gemstone’s images tarnished, but Tiffany and Co., Jewelry industries in countries such as Sri Lanka are Zale Corp. and QVC Inc. all decided to boycott taking advantage of CAD CAM models to effi- Zale Corp. and QVC Inc. all decided to boycott taking advantage of CAD CAM models to effi- purchase of the precious stone. The boycotts have ciently produce jewelry for domestic consumption purchase of the precious stone. The boycotts have ciently produce jewelry for domestic consumption subsequently been dropped, but the need for and export. As Tanzania considers forward integra- subsequently been dropped, but the need for and export. As Tanzania considers forward integra- greater transparency and accountability in the form tion in the gemstone industry, large-scale training greater transparency and accountability in the form tion in the gemstone industry, large-scale training of a traceability system became clear. of jewelers could be accomplished through the use of a traceability system became clear. of jewelers could be accomplished through the use of CAD CAM products such as Gemvision. of CAD CAM products such as Gemvision. In response to these allegations and recognizing the Gemvision allows users ranging from the smallest In response to these allegations and recognizing the Gemvision allows users ranging from the smallest potential for future incrimination, the Tanzanian retailer to the largest manufacturer to create new, potential for future incrimination, the Tanzanian retailer to the largest manufacturer to create new, government, the U.S. State Department and indus- innovative jewelry designs. The software features a government, the U.S. State Department and indus- innovative jewelry designs. The software features a try leaders convened in 2002 to assess the situation jeweler-friendly interface and step-by-step menus try leaders convened in 2002 to assess the situation jeweler-friendly interface and step-by-step menus and develop possible remedies. The output of this that allow users to design unique jewelry through a and develop possible remedies. The output of this that allow users to design unique jewelry through a meeting was the Tucson Tanzanite Protocols, a doc- quick and simple process. The CAM component meeting was the Tucson Tanzanite Protocols, a doc- quick and simple process. The CAM component ument that commits Tanzanite miners and dealers generates a dimensionally accurate wax model ready ument that commits Tanzanite miners and dealers generates a dimensionally accurate wax model ready in Tanzania and abroad to adopt a system of written for casting the design. Gemvision retails at in Tanzania and abroad to adopt a system of written for casting the design. Gemvision retails at warranties to guarantee that all tanzanite comes US$6,500 for its core Matrix software, and an warranties to guarantee that all tanzanite comes US$6,500 for its core Matrix software, and an

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additional US$24,995 for the CAM equipment. introduced because of the tourism industry. When additional US$24,995 for the CAM equipment. introduced because of the tourism industry. When The software and equipment could be owned and done poorly, however, tourism exploits cheap labor, The software and equipment could be owned and done poorly, however, tourism exploits cheap labor, shared among cluster-level groups within the sector. provides little or no economic multiplier to the shared among cluster-level groups within the sector. provides little or no economic multiplier to the This investment would transform the design and larger economy, and deteriorates the environment. This investment would transform the design and larger economy, and deteriorates the environment. innovation process. Processes that used to take innovation process. Processes that used to take years of training and weeks of labor could be Tanzania’s tourism sector is still recovering from the years of training and weeks of labor could be Tanzania’s tourism sector is still recovering from the accomplished in a matter of hours. Additionally, effects of the terrorist bombing at the U.S. embassy accomplished in a matter of hours. Additionally, effects of the terrorist bombing at the U.S. embassy CAD CAM could be leveraged to create unique, in August 1998, and in comparison with Kenya, CAD CAM could be leveraged to create unique, in August 1998, and in comparison with Kenya, distinctly Tanzanian designs that incorporate the South Africa, Mauritius, Zambia and Uganda, its distinctly Tanzanian designs that incorporate the South Africa, Mauritius, Zambia and Uganda, its rare tanzanite stone. This differentiation would progress is halting. While each of these countries rare tanzanite stone. This differentiation would progress is halting. While each of these countries increase the value of jewelry exports, and could also experienced an increase in arrivals from 1999 to increase the value of jewelry exports, and could also experienced an increase in arrivals from 1999 to be marketed in conjunction with the local tourism 2003, see Figure 27, Tanzania’s arrivals declined be marketed in conjunction with the local tourism 2003, see Figure 27, Tanzania’s arrivals declined industry. from 627,000 to 576,000, a compound annual industry. from 627,000 to 576,000, a compound annual growth rate of -1.7%. The same is true of country growth rate of -1.7%. The same is true of country CAD CAM development is an area that could be tourism expenditures, which grew in all of the CAD CAM development is an area that could be tourism expenditures, which grew in all of the fruitful for Tanzania’s ICT industry, particularly in comparison countries, but declined in Tanzania. fruitful for Tanzania’s ICT industry, particularly in comparison countries, but declined in Tanzania. tandem with increasing competitiveness in the jew- See Figure 29. tandem with increasing competitiveness in the jew- See Figure 29. elry sector. The GOT could sponsor trainings that elry sector. The GOT could sponsor trainings that would offer gemstone dealers and jewelry makers The one positive indicator for Tanzania is that aver- would offer gemstone dealers and jewelry makers The one positive indicator for Tanzania is that aver- exposure to the potential of CAD CAM. Once its age stay has grown from 7.7 days in 1999 to 11 days exposure to the potential of CAD CAM. Once its age stay has grown from 7.7 days in 1999 to 11 days impact on productivity and profit margins is in 2003. This is most likely due to tour operators impact on productivity and profit margins is in 2003. This is most likely due to tour operators understood, CAD CAM software demand would adding days in Zanzibar to their travel packages. understood, CAD CAM software demand would adding days in Zanzibar to their travel packages. increase within the sector. This is a powerful exam- This is a sign of progress, although there is a clear increase within the sector. This is a powerful exam- This is a sign of progress, although there is a clear ple of the kind of tandem growth that will take risk of Tanzania falling into competition for price- ple of the kind of tandem growth that will take risk of Tanzania falling into competition for price- place between sectors pursuing competitive strate- sensitive tourists. The decrease in tourism receipts place between sectors pursuing competitive strate- sensitive tourists. The decrease in tourism receipts gies and demand for complex, sophisticated ICT and increase in length of stay have led to a decrease gies and demand for complex, sophisticated ICT and increase in length of stay have led to a decrease products. in spend per day, from US$ 96.73 in 1999 to only products. in spend per day, from US$ 96.73 in 1999 to only US$ 71.65 in 2003. During this same period, all of US$ 71.65 in 2003. During this same period, all of Following through on this model of forward inte- the comparison countries grew in spend per day. Following through on this model of forward inte- the comparison countries grew in spend per day. gration and increased competitiveness, however, Kenya, the recent poster child for a decaying tourism gration and increased competitiveness, however, Kenya, the recent poster child for a decaying tourism will require close coordination between the public model, has closed the gap with Tanzania in terms of will require close coordination between the public model, has closed the gap with Tanzania in terms of and private sector. Investment and commitment spend per day. In 1999 Kenya’s gap with Tanzania in and private sector. Investment and commitment spend per day. In 1999 Kenya’s gap with Tanzania in will be required by both parties for activities such spend per day was 45%. This figure has been will be required by both parties for activities such spend per day was 45%. This figure has been as training domestic artisans, financing the pur- reduced to only 8.5% in 2003. Tanzania’s tourism as training domestic artisans, financing the pur- reduced to only 8.5% in 2003. Tanzania’s tourism chase of appropriate technology and the in-depth sector has tremendous potential, as demonstrated by chase of appropriate technology and the in-depth sector has tremendous potential, as demonstrated by primary market research required to identify under- positive consumer perceptions in Figure 26. But it primary market research required to identify under- positive consumer perceptions in Figure 26. But it served market needs and compete in the interna- has been underperforming due to lack of industry served market needs and compete in the interna- has been underperforming due to lack of industry tional marketplace. coordination and the absence of a sound competitive tional marketplace. coordination and the absence of a sound competitive strategy. strategy.

A critical piece of creating and managing competi- A critical piece of creating and managing competitive strategy is the ability to incorporate sophisticat- tive strategy is the ability to incorporate sophisticat- 5.4 SERVICES ed customer preferences into differentiated offer- 5.4 SERVICES ed customer preferences into differentiated offerings. This is particularly true in the tourism indus- ings. This is particularly true in the tourism indus- 5.4.1 Tourism try, where demanding customers are willing to pay 5.4.1 Tourism try, where demanding customers are willing to pay Tourism is a significant and promising sector of a significant premium for unique, memorable Tourism is a significant and promising sector of a significant premium for unique, memorable Tanzania’s economy. When done successfully, the experiences that do not involve worrying about Tanzania’s economy. When done successfully, the experiences that do not involve worrying about multiplier effects of tourism touch every citizen in logistical details. multiplier effects of tourism touch every citizen in logistical details. the country: directly through jobs or business the country: directly through jobs or business opportunities, indirectly through additional pur- 5.4.1.1 Tour Operators opportunities, indirectly through additional pur- 5.4.1.1 Tour Operators chasing power of the local population, or through The number of foreign visitors to Tanzania’s chasing power of the local population, or through The number of foreign visitors to Tanzania’s new services and experiences available to citizens national parks jumped from 367,022 in 1999 to new services and experiences available to citizens national parks jumped from 367,022 in 1999 to

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FIGURE 26. CUSTOMER PORTRAIT(TM) OF THE TRAVELER TO EAST AFRICA FIGURE 26. CUSTOMER PORTRAIT(TM) OF THE TRAVELER TO EAST AFRICA

Is very safe Has great wildlife

Tanzania 5.5 Tanzania 6.2

Kenya 5.1 Kenya 6.1

Uganda 4.7 Uganda 4.9

Rwanda 4.0 Rwanda 4.4

1 2 3 4 5 6 7 1 2 3 4 5 6 7

Is very distinctive among African destinations Is a place to rest, relax and relieve stress

Tanzania 5.0 Tanzania 5.4

Kenya 4.9 Kenya 5.0

Uganda 4.4 Uganda 4.5

Rwanda 3.7 Rwanda 3.9

1 2 3 4 5 6 7 1 2 3 4 5 6 7

Source: OTF Group Tourism Visitor Quantitative Survey 2002 n=225 Source: OTF Group Tourism Visitor Quantitative Survey 2002 n=225

500,266 in 2004. This number is significant, not organized tour, the most popular of which is a five- 500,266 in 2004. This number is significant, not organized tour, the most popular of which is a five- only as a dramatic increase, but as one which day, four-night visit to the Serengeti, with an aver- only as a dramatic increase, but as one which day, four-night visit to the Serengeti, with an aver- occurred despite a general decline in arrivals. The age cost of US$250/day.65 Based on interviews con- occurred despite a general decline in arrivals. The age cost of US$250/day.65 Based on interviews con- majority of these visits take place as part of an ducted in Tanzania, this rapid increase is most likely majority of these visits take place as part of an ducted in Tanzania, this rapid increase is most likely

FIGURE 27. INBOUND TOURISM ARRIVALS FIGURE 27. INBOUND TOURISM ARRIVALS

7,000

6,000

5,000

4,000

3,000 Thousands

2,000

1,000

0 1999 2000 2001 2002 2003 Tanzania Uganda Kenya Mauritius South Africa Zambia

Source: World Tourism Organization Source: World Tourism Organization

65 OTF Group interviews: Takims Holidays, Leopard Tours, Multi-Choice Tours, Hima Tours 65 OTF Group interviews: Takims Holidays, Leopard Tours, Multi-Choice Tours, Hima Tours

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FIGURE 28. AVERAGE LENGTH OF STAY FIGURE 28. AVERAGE LENGTH OF STAY

12.0

Mauritius 10.0 Kenya

Zambia 8.0 Tanzania

6.0 Days

4.0

2.0

0.0 1999 2000 2001 2002 2003

Source: World Tourism Organization Source: World Tourism Organization

a direct reflection of the trend towards “packaging” ease and sense of security, books an all-inclusive trip a direct reflection of the trend towards “packaging” ease and sense of security, books an all-inclusive trip tour experiences, an area that could be promising, through an agent in their home country. Then, tour experiences, an area that could be promising, through an agent in their home country. Then, but often falls prey to commoditization and price once in Tanzania, all of the accommodation, logisti- but often falls prey to commoditization and price once in Tanzania, all of the accommodation, logisti- competition. cal and entertainment needs are arranged by a competition. cal and entertainment needs are arranged by a Tanzanian-based tour operator on the ground. Tanzanian-based tour operator on the ground. The general structure of tourists’ experience when There is often a huge disconnect between the cus- The general structure of tourists’ experience when There is often a huge disconnect between the cus- they travel to Tanzania is as follows: the tourist is tomers and operators until they arrive in Tanzania. they travel to Tanzania is as follows: the tourist is tomers and operators until they arrive in Tanzania. visiting Africa for the first time and, motivated by However, the tour operators are a key component of visiting Africa for the first time and, motivated by However, the tour operators are a key component of

FIGURE 29. IN-COUNTRY TOURISM EXPENDITURE FIGURE 29. IN-COUNTRY TOURISM EXPENDITURE

6,000

5,000

4,000

3,000 US$ millions 2,000

1,000

0 1999 2000 2001 2002 2003

Tanzania Uganda Kenya Mauritius South Africa Zambia

Source: World Tourism Organization Source: World Tourism Organization

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FIGURE 30. SPEND PER DAY FIGURE 30. SPEND PER DAY

140

120 Mauritius

100 Tanzania

80 US$ 60 Uganda

40 Zambia 20

0 1999 2000 2001 2002 2003

the tourism industry, as often they are the primary transactions hinders tour operators and other play- the tourism industry, as often they are the primary transactions hinders tour operators and other play- interface with visitors once they reach Tanzania. ers in the tourism industry from greatly increasing interface with visitors once they reach Tanzania. ers in the tourism industry from greatly increasing spend per day. spend per day. Tanzania’s tour operators are positioned in such a Tanzania’s tour operators are positioned in such a way that it is difficult for them to implement and way that it is difficult for them to implement and sustain sound competitive strategies. Most tour 5.4.1.2 Targeted ICT Interventions sustain sound competitive strategies. Most tour 5.4.1.2 Targeted ICT Interventions operators act as business-to-business ground opera- There are several areas in which ICT could play a operators act as business-to-business ground opera- There are several areas in which ICT could play a tors, focusing their marketing efforts and relation- greater role within the tourism industry, particularly tors, focusing their marketing efforts and relation- greater role within the tourism industry, particularly ship management on independent agents with regarding customer knowledge, communication, ship management on independent agents with regarding customer knowledge, communication, whom they work, mainly in Europe, the Americas, and industry-level branding. Several of the poten- whom they work, mainly in Europe, the Americas, and industry-level branding. Several of the poten- Asia and Australia. Tour operators pay up to US$ tial ICT interventions in the tourism value chain Asia and Australia. Tour operators pay up to US$ tial ICT interventions in the tourism value chain 3,000 to participate in an overseas trade fair, at are illustrated at the industry levels of customer 3,000 to participate in an overseas trade fair, at are illustrated at the industry levels of customer which they meet agents and advertise their services. procurement and in-country experience in Figure 31. which they meet agents and advertise their services. procurement and in-country experience in Figure 31. The tour operators interviewed did not consider For the purpose of this study, a tourist’s process of The tour operators interviewed did not consider For the purpose of this study, a tourist’s process of which market segments or customers they were tar- taking a vacation can be reduced to four primary which market segments or customers they were tar- taking a vacation can be reduced to four primary geting; they leave that component to the agents, steps. The tourist begins by planning a vacation geting; they leave that component to the agents, steps. The tourist begins by planning a vacation who also set the end price, a figure that is often and considering the various options. The next step who also set the end price, a figure that is often and considering the various options. The next step unknown to the tour operators. is focused on selection. Based on the options and unknown to the tour operators. is focused on selection. Based on the options and offerings, which destination and range of offerings offerings, which destination and range of offerings There are several areas in need of improvement for does he or she select? The third part is the in-country There are several areas in need of improvement for does he or she select? The third part is the in-country Tanzania’s tourism sector to increase its competi- experience, which encompasses all local activities Tanzania’s tourism sector to increase its competi- experience, which encompasses all local activities tiveness. Operators’ reliance on intermediaries, due and travel. Finally, post-trip, the tourist processes tiveness. Operators’ reliance on intermediaries, due and travel. Finally, post-trip, the tourist processes to limited communication and information capa- the high points and low points of the trip, which to limited communication and information capa- the high points and low points of the trip, which bilities, leaves them with very little bargaining inform planning the next trip. bilities, leaves them with very little bargaining inform planning the next trip. power and diminished margins. Limited opera- power and diminished margins. Limited operational capacity makes it difficult for them to offer tional capacity makes it difficult for them to offer customized experiences and forces more generic Broad Use of ICT customized experiences and forces more generic Broad Use of ICT packages. This leaves operators with little ability to From an operational standpoint, limited use of ICT packages. This leaves operators with little ability to From an operational standpoint, limited use of ICT cater to segments of tourist with higher potential restricts tour operators’ ability to target customer cater to segments of tourist with higher potential restricts tour operators’ ability to target customer margins. With few processes for information shar- segments, move into new markets and improve their margins. With few processes for information shar- segments, move into new markets and improve their ing and communication, operators cannot offer operational efficiency. Without these capabilities, ing and communication, operators cannot offer operational efficiency. Without these capabilities, complex product offerings that command a premi- operators are in a suboptimal position vis-à-vis their complex product offerings that command a premi- operators are in a suboptimal position vis-à-vis their um. Finally, limited ability to facilitate credit card agents, with little bargaining power and minimal um. Finally, limited ability to facilitate credit card agents, with little bargaining power and minimal

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FIGURE 31. TOURIST EXPERIENCE AND POTENTIAL ICT IMPROVEMENTS FIGURE 31. TOURIST EXPERIENCE AND POTENTIAL ICT IMPROVEMENTS

Stages of a Tourist’s Experience

The post-trip experience and memories will inform the planning of subsequent trips.

In-Country Planning Selection Post-Trip Experience

ICT Interventions

• Web presence to • Use of cost effective • Improve information • Post-trip survey attract new customers technologies such as sharing and deployed to refine and build name VOIP to improve communication product features and recognition the speed and reduce between ground overall offering the cost of customer operators. Improve • Decide which • Maintain communication logistics to enhance communication with customers to target the quality of the • Provide complex customers, and based on market experience. knowledge and offerings which are leverage them for explicit customer differentiated from • Enable electronic referrals and new preferences competitors’, and for payment via credit customer procurment. which customers are and debit cards. willing to pay a premium

ability to determine price and margins. While most monitor customer behavior and preferences and ability to determine price and margins. While most monitor customer behavior and preferences and companies involved in tourism do have websites react to them seamlessly, ICT are at the crux of companies involved in tourism do have websites react to them seamlessly, ICT are at the crux of and email, these platforms for communication are these exchanges. The ability of operational man- and email, these platforms for communication are these exchanges. The ability of operational man- underutilized. Incorporating electronic databases agers to incorporate this type of data and react to it underutilized. Incorporating electronic databases agers to incorporate this type of data and react to it and optimizing current means of communication immediately, instead of operating on intuition, will and optimizing current means of communication immediately, instead of operating on intuition, will would increase Tanzania’s tour operators’ ability to provide both new and established companies the would increase Tanzania’s tour operators’ ability to provide both new and established companies the control their own pricing and margins, as well as necessary edge to regain a competitive position. control their own pricing and margins, as well as necessary edge to regain a competitive position. greater ability to negotiate with agents. greater ability to negotiate with agents. One prime example of enhanced competitiveness One prime example of enhanced competitiveness through ICT in the tourism industry is Leopard through ICT in the tourism industry is Leopard Customer Knowledge and Communication Tours. Leopard is one of the biggest ground tour Customer Knowledge and Communication Tours. Leopard is one of the biggest ground tour An important way that Tanzanian firms can leverage operators in Tanzania, functioning with a business- An important way that Tanzanian firms can leverage operators in Tanzania, functioning with a business- ICT is to increase customer knowledge and commu- to-business model where clients are secured ICT is to increase customer knowledge and commu- to-business model where clients are secured nication. Firms compete and win by embedding through independent agents located worldwide. nication. Firms compete and win by embedding through independent agents located worldwide. unique insights about customer needs and prefer- Over a decade ago, Leopard began using email to unique insights about customer needs and prefer- Over a decade ago, Leopard began using email to ences into the products they produce and the chan- correspond with its agents, suppliers, and direct ences into the products they produce and the chan- correspond with its agents, suppliers, and direct nels they engage to sell those products. These clients overseas. Initially, managers were very reluc- nels they engage to sell those products. These clients overseas. Initially, managers were very reluc- insights, which are a fundamental component of tant to embrace this new technology, and still relied insights, which are a fundamental component of tant to embrace this new technology, and still relied competitive firms and clusters, can only be captured on fax and telephone as the primary means of con- competitive firms and clusters, can only be captured on fax and telephone as the primary means of con- through interaction with and feedback from cus- tact with foreign clients. through interaction with and feedback from cus- tact with foreign clients. tomers. The closer a firm is to its end customers, the tomers. The closer a firm is to its end customers, the easier it is to understand those customer needs and Over time, however, as the staff became more easier it is to understand those customer needs and Over time, however, as the staff became more to control the processes which create those products. familiar with email and electronic communica- to control the processes which create those products. familiar with email and electronic communication, the fax and phone became largely irrelevant. tion, the fax and phone became largely irrelevant. ICT provide a quick and cost effective way to Leopard quickly realized that this transition to ICT provide a quick and cost effective way to Leopard quickly realized that this transition to maintain communication with potential and previ- email-based correspondence led to a cost reduc- maintain communication with potential and previ- email-based correspondence led to a cost reduc- ous customers. From online surveys of customer tion of over 50%. Its cost for email is now only ous customers. From online surveys of customer tion of over 50%. Its cost for email is now only preferences, to shared systems that allow firms to US$ 2,800 per year. This ICT improvement preferences, to shared systems that allow firms to US$ 2,800 per year. This ICT improvement

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encouraged Leopard to investigate other means of Tanzania’s “Authentic Africa” is a nature-lover’s encouraged Leopard to investigate other means of Tanzania’s “Authentic Africa” is a nature-lover’s embracing technology to cut its costs while still destination with a wide array of activities and embracing technology to cut its costs while still destination with a wide array of activities and maintaining close contact with its customers and offerings, friendly people and cultures, the unique maintaining close contact with its customers and offerings, friendly people and cultures, the unique contacts. It is now in the process of setting up offerings of Zanzibar and Kilimanjaro, and a range contacts. It is now in the process of setting up offerings of Zanzibar and Kilimanjaro, and a range VOIP phone lines. They expect the cost reduc- of differentiated safari experiences. This type of VOIP phone lines. They expect the cost reduc- of differentiated safari experiences. This type of tions to be important, as after the US$ 3,000 brand and channel-building also allows smaller tions to be important, as after the US$ 3,000 brand and channel-building also allows smaller installation, the cost of international and domestic players to leverage ICT without needing to invest installation, the cost of international and domestic players to leverage ICT without needing to invest calls will be reduced to the cost of their ISP sub- in the creation and maintenance of an independ- calls will be reduced to the cost of their ISP sub- in the creation and maintenance of an independ- scription (~US$ 120/month). ent website and marketing efforts. This is particu- scription (~US$ 120/month). ent website and marketing efforts. This is particularly true for small guesthouses and tour operators, larly true for small guesthouses and tour operators, which can use this channel to gain new customers. which can use this channel to gain new customers. Electronic Payment: Credit Card Payment Electronic Payment: Credit Card Payment The ability to accept credit cards is still rare in While these ICT interventions do have the poten- The ability to accept credit cards is still rare in While these ICT interventions do have the poten- many segments of Tanzania’s tourism sector. From tial to enhance competitiveness, it is important to many segments of Tanzania’s tourism sector. From tial to enhance competitiveness, it is important to lodges and hotels to retail businesses serving the recognize the parts of the industry structure for lodges and hotels to retail businesses serving the recognize the parts of the industry structure for tourism sector and the tour operators described which ICT is no substitute for human interaction. tourism sector and the tour operators described which ICT is no substitute for human interaction. above, very few businesses are capable of accepting Websites can be a valuable tool in terms of provid- above, very few businesses are capable of accepting Websites can be a valuable tool in terms of provid- and processing credit card payments. This impedi- ing additional information to customers and build- and processing credit card payments. This impedi- ing additional information to customers and build- ment has a direct impact at an industry level, guiding the tour operator’s brand, but they hold two ment has a direct impact at an industry level, guiding the tour operator’s brand, but they hold two ing how tourists choose hotels, tour operators, and important limitations in terms of driving transac- ing how tourists choose hotels, tour operators, and important limitations in terms of driving transac- where they choose to make purchases. This issue tion volume. The primary limitation is that most where they choose to make purchases. This issue tion volume. The primary limitation is that most also has a macro effect on spend per day, as tourists tourists coming to Africa want the legitimacy and also has a macro effect on spend per day, as tourists tourists coming to Africa want the legitimacy and are limited in their ability to make purchases by the credibility gained through meeting with an agent are limited in their ability to make purchases by the credibility gained through meeting with an agent amount of cash they are carrying. and initiating the transaction in their home coun- amount of cash they are carrying. and initiating the transaction in their home country. Booking a trip via a website, particularly if the try. Booking a trip via a website, particularly if the operator lacks certification, poses significant uncer- operator lacks certification, poses significant uncer- Country Web Presence and Branding tainty and risks in the eyes of most travelers. The Country Web Presence and Branding tainty and risks in the eyes of most travelers. The When tourists consider their destination options, second area of difficulty is the inefficiency of web When tourists consider their destination options, second area of difficulty is the inefficiency of web they generally think in terms of national and communication. While, most tour operators do they generally think in terms of national and communication. While, most tour operators do regional level locations, not individual hotels or tour have some direct customers via their website, this regional level locations, not individual hotels or tour have some direct customers via their website, this operators. Thus, the issue of Tanzania’s image as a only accounts for 5% of their business on average. operators. Thus, the issue of Tanzania’s image as a only accounts for 5% of their business on average. country, and industry level coordination of brand- Their ability to generate greater volume is con- country, and industry level coordination of brand- Their ability to generate greater volume is con- ing and publicity is essential. A tourism web portal strained by both the demands of corresponding ing and publicity is essential. A tourism web portal strained by both the demands of corresponding can play a key role in building this brand. It also with potential customers and driving business can play a key role in building this brand. It also with potential customers and driving business allows tourists who enjoy planning their own trip to through the website, as well as the difficulty of allows tourists who enjoy planning their own trip to through the website, as well as the difficulty of build an itinerary and more easily secure bookings. securing a booking with a client after correspon- build an itinerary and more easily secure bookings. securing a booking with a client after correspon- The Tanzania Tourist Board has spearheaded this dence. Often, correspondences that last for over The Tanzania Tourist Board has spearheaded this dence. Often, correspondences that last for over type of initiative, a sign that the industry may be 4 months with potential customers do not lead to type of initiative, a sign that the industry may be 4 months with potential customers do not lead to ready to embrace competitiveness and commit the a booking, as the competition among operators ready to embrace competitiveness and commit the a booking, as the competition among operators necessary resources to sector development. online is fierce and often caters to price-sensitive necessary resources to sector development. online is fierce and often caters to price-sensitive consumers. Tour operators simply cannot generate consumers. Tour operators simply cannot generate The Tanzania Tourist Board recently launched a the type of volume through their website which The Tanzania Tourist Board recently launched a the type of volume through their website which comprehensive tourism portal, with photos, infor- they enjoy when linked to agents. comprehensive tourism portal, with photos, infor- they enjoy when linked to agents. mation on activities, logistics, and links to accred- mation on activities, logistics, and links to accred- ited hotels and lodges. The Tourist Board used the Tehsin Takim confronted this reality directly. In ited hotels and lodges. The Tourist Board used the Tehsin Takim confronted this reality directly. In site to begin re-branding Tanzania as “Tanzania: his 52 years of operation within Tanzania, Takims site to begin re-branding Tanzania as “Tanzania: his 52 years of operation within Tanzania, Takims Authentic Africa,” an attempt to project Tanzania Holidays’ director, Tehsin Takim, has learned much Authentic Africa,” an attempt to project Tanzania Holidays’ director, Tehsin Takim, has learned much as a one-stop tourist destination, not simply the about the tourism business. Like many tour opera- as a one-stop tourist destination, not simply the about the tourism business. Like many tour opera- land of Kilimanjaro or the land of Zanzibar. When tors in Tanzania, Takims Holiday relies on out- land of Kilimanjaro or the land of Zanzibar. When tors in Tanzania, Takims Holiday relies on out- done well, this type of web presence can have a sourced, agent-based customer procurement for its done well, this type of web presence can have a sourced, agent-based customer procurement for its significant impact on potential visitors’ impres- local tours and safaris. On the surface, this seems significant impact on potential visitors’ impres- local tours and safaris. On the surface, this seems sions and desire to plan a trip to this destination. like an ideal area for ICT intervention and sions and desire to plan a trip to this destination. like an ideal area for ICT intervention and

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improvement. In 1996, Takims Holidays created business issue, not a technology issue.”66 The improvement. In 1996, Takims Holidays created business issue, not a technology issue.”66 The its first website, consisting of eight pages at a cost Tanzanian market is not yet attractive for banks in its first website, consisting of eight pages at a cost Tanzanian market is not yet attractive for banks in of $600 for the basic design. It has since re-vamped terms of credit cards. However, debit card issuance of $600 for the basic design. It has since re-vamped terms of credit cards. However, debit card issuance the website, which can be found at www.takimshol- is a very new phenomenon, one that usually leads the website, which can be found at www.takimshol- is a very new phenomenon, one that usually leads idays.com. While website development could in to a credit card market, and can create the neces- idays.com. While website development could in to a credit card market, and can create the neces- some ways substitute for an agent by finding new sary infrastructure for e-commerce. some ways substitute for an agent by finding new sary infrastructure for e-commerce. customers, advertising services and securing book- customers, advertising services and securing bookings, Takims Holidays found that it is in no way In addition to this evolutionary path of financial ings, Takims Holidays found that it is in no way In addition to this evolutionary path of financial a substitute for the business it receives through its services, there are several other factors that have a substitute for the business it receives through its services, there are several other factors that have relationships with foreign agents. ICT played a made the issuance of credit cards and the emer- relationships with foreign agents. ICT played a made the issuance of credit cards and the emer- supporting role, but could not provide a substitute gence of e-commerce, difficult. supporting role, but could not provide a substitute gence of e-commerce, difficult. for the value of credibility and legitimacy conferred for the value of credibility and legitimacy conferred by home-country presence. 1. National Identification System. A more reli- by home-country presence. 1. National Identification System. A more reliable national system for personal identification able national system for personal identification One possible route for the development of the is required to identify and register people One possible route for the development of the is required to identify and register people tourism sector is forward integration into the area within a country. Such a system is necessary to tourism sector is forward integration into the area within a country. Such a system is necessary to of foreign agents. Some of the larger tour operators ensure that credit can be adequately assessed of foreign agents. Some of the larger tour operators ensure that credit can be adequately assessed would likely increase their profit margins and have and so that credit-granting institutions are would likely increase their profit margins and have and so that credit-granting institutions are much greater control over targeting customers if have recourse in situations of default. Tanzania much greater control over targeting customers if have recourse in situations of default. Tanzania they established a foreign presence as agents. has been in the process of developing a they established a foreign presence as agents. has been in the process of developing a Depending on constraints of cost and scale, indus- National Identification System for the past ten Depending on constraints of cost and scale, indus- National Identification System for the past ten try level collaboration should also be investigated. years, but it is not yet completed. According try level collaboration should also be investigated. years, but it is not yet completed. According to Deputy Minister of Home Affairs, John to Deputy Minister of Home Affairs, John 5.4.2 ICT in Banking and E-commerce Chiligati, the GOT is currently undertaking a 5.4.2 ICT in Banking and E-commerce Chiligati, the GOT is currently undertaking a The development of a sophisticated financial services feasibility study to assess the implementation The development of a sophisticated financial services feasibility study to assess the implementation industry that can facilitate secure transactions and of this system, which will cost an estimated industry that can facilitate secure transactions and of this system, which will cost an estimated efficient capital allocation is an essential component US$90 million.67 efficient capital allocation is an essential component US$90 million.67 of an enabling environment conducive to private sec- 2. National Switch. A national switch system of an enabling environment conducive to private sec- 2. National Switch. A national switch system tor growth. Tanzania is at a nascent stage in terms of enables connectivity and network among tor growth. Tanzania is at a nascent stage in terms of enables connectivity and network among financial services and products. The national bank- banks. It is one of the prerequisites to an financial services and products. The national bank- banks. It is one of the prerequisites to an ing industry consists of both foreign and local players, e-commerce gateway. Without a national ing industry consists of both foreign and local players, e-commerce gateway. Without a national including Citibank Tanzania, Barclay’s, Standard switch, a country’s ATM machines are not including Citibank Tanzania, Barclay’s, Standard switch, a country’s ATM machines are not Chartered, National Bank of Commerce, National linked to the same network; similarly, it is Chartered, National Bank of Commerce, National linked to the same network; similarly, it is Microfinance Bank, Azania Bank and CRDB Bank. impossible to transfer funds to someone who Microfinance Bank, Azania Bank and CRDB Bank. impossible to transfer funds to someone who These institutions respond to local market conditions uses a different bank. Standard Chartered These institutions respond to local market conditions uses a different bank. Standard Chartered and provide products and services appropriate for Bank is currently investing in national switch and provide products and services appropriate for Bank is currently investing in national switch Tanzania’s level of ICT adoption. For example, components. Other banks can join the switch Tanzania’s level of ICT adoption. For example, components. Other banks can join the switch CRDB bank just introduced two new products: SMS and participate in network transactions. CRDB bank just introduced two new products: SMS and participate in network transactions. banking, which allows clients to use mobile phones banking, which allows clients to use mobile phones to transfer funds and receive balance information, As detailed in Table 6, the cost of website design and to transfer funds and receive balance information, As detailed in Table 6, the cost of website design and and the “Tembo Card”, a type of debit card. hosting for e-commerce is by no means exorbitant. and the “Tembo Card”, a type of debit card. hosting for e-commerce is by no means exorbitant. For e-commerce, however, a website also needs to For e-commerce, however, a website also needs to One significant use of ICT is to enhance competi- acquire a credit card merchant account and an online One significant use of ICT is to enhance competi- acquire a credit card merchant account and an online tiveness through e-commerce. Yet, e-commerce transaction provider. Those merchants without an tiveness through e-commerce. Yet, e-commerce transaction provider. Those merchants without an only occurs in very limited settings, and generally account in a foreign bank would need a “cardholder only occurs in very limited settings, and generally account in a foreign bank would need a “cardholder Tanzanians are unable to buy and sell items or serv- not present” merchant account. This account obli- Tanzanians are unable to buy and sell items or serv- not present” merchant account. This account obli- ices online. According to managers at Standard gates the merchant to requirements specified by the ices online. According to managers at Standard gates the merchant to requirements specified by the Chartered Bank, the absence of credit card issuance acquiring bank and is generally seen as a higher risk Chartered Bank, the absence of credit card issuance acquiring bank and is generally seen as a higher risk and emergence of e-commerce is fundamentally “a account and thus carries merchant fees. and emergence of e-commerce is fundamentally “a account and thus carries merchant fees.

66 OTF Group Interview. 66 OTF Group Interview. 67 Lyimo, Karl. “Tanzania Shouldn’t Waste Money on ID Cards.” August 2, 2005. Available at http://allafrica.com/stories/200508021061.html. 67 Lyimo, Karl. “Tanzania Shouldn’t Waste Money on ID Cards.” August 2, 2005. Available at http://allafrica.com/stories/200508021061.html.

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TABLE 6. Costs of website design and hosting TABLE 6. Costs of website design and hosting

Basic, 1 Page Complex Online Basic, 1 Page Complex Online Website Shop Website Shop Design Costs US$200 -1000 US$2000 – 3000 Design Costs US$200 -1000 US$2000 – 3000

Hosting Costs/Month $50 $120 Hosting Costs/Month $50 $120

International Bandwidth 1.5 gigabytes 10 gigabytes International Bandwidth 1.5 gigabytes 10 gigabytes

Includes 25 email accounts 5 email accounts Includes 25 email accounts 5 email accounts & Web-enabled & Web-enabled & Web-enabled & Web-enabled order forms order forms order forms order forms

Total Annual Cost US$ 800 – 1,600 US$ 3,440 – 4,440 Total Annual Cost US$ 800 – 1,600 US$ 3,440 – 4,440

Source: Tanzania Internet Hosting, Source: Tanzania Internet Hosting, www.tih.co.tz/hosting.shtml www.tih.co.tz/hosting.shtml

5.4.3 Future Development of Services Current key issues in BPO development in 5.4.3 Future Development of Services Current key issues in BPO development in Sector: Business Process Outsourcing Tanzania are: Sector: Business Process Outsourcing Tanzania are: Low Labor Productivity. Call centers from the Low Labor Productivity. Call centers from the The future development of an ICT Business The future development of an ICT Business U.S. will only outsource operations if they are U.S. will only outsource operations if they are Process Outsourcing (BPO) services industry in Process Outsourcing (BPO) services industry in able to make at least 40% savings margins.69 The able to make at least 40% savings margins.69 The Tanzania could be attractive given that experts Tanzania could be attractive given that experts ability of Tanzania to provide these savings in ability of Tanzania to provide these savings in project the market will exceed US$ 90 billion by project the market will exceed US$ 90 billion by BPO will depend on its ability to keep wages BPO will depend on its ability to keep wages 2006.68 However, in order for BPO to be at all fea- 2006.68 However, in order for BPO to be at all fea- low and productivity high. low and productivity high. sible or profitable, careful consideration must be sible or profitable, careful consideration must be High Connectivity Costs. The cost of connec- High Connectivity Costs. The cost of connec- given to the inputs and enabling environment nec- given to the inputs and enabling environment nectivity and outbound calls remains an obstacle tivity and outbound calls remains an obstacle essary to foster a competitive BPO sector. essary to foster a competitive BPO sector. for Tanzania in terms of BPO competitiveness. for Tanzania in terms of BPO competitiveness. The absolute and relative costs, as shown in The absolute and relative costs, as shown in The most basic form of BPO is the call center, of The most basic form of BPO is the call center, of Figure 32, are not competitive in supporting call Figure 32, are not competitive in supporting call which there are two major types: telemarketing, which there are two major types: telemarketing, centers. These costs could be reduced with the centers. These costs could be reduced with the which involves outbound calling to sell products and which involves outbound calling to sell products and implementation of the Eastern African implementation of the Eastern African services, and customer service, mostly inbound calls services, and customer service, mostly inbound calls Submarine Cable System (EASSY) and backbone Submarine Cable System (EASSY) and backbone answering concerns and solving customer problems. answering concerns and solving customer problems. infrastructure projects discussed in Section 4. infrastructure projects discussed in Section 4. Telemarketing centers receive commissions on sales Telemarketing centers receive commissions on sales VOIP could also play a significant role in VOIP could also play a significant role in closed. Typically a call center will purchase call lists, closed. Typically a call center will purchase call lists, reducing communication costs. reducing communication costs. and are paid, for instance, by a credit card company and are paid, for instance, by a credit card company Accents. Although it may sound trivial, OTF Accents. Although it may sound trivial, OTF based on how many credit cards are sold. In the tele- based on how many credit cards are sold. In the tele- Group learned in its research with Caribbean Group learned in its research with Caribbean marketing and low-level customer service industries, marketing and low-level customer service industries, firms that a major obstacle faced by telemar- firms that a major obstacle faced by telemar- the ability to compete is based on low costs. the ability to compete is based on low costs. keting call centers has been the lack of trust keting call centers has been the lack of trust from US customers in giving credit card from US customers in giving credit card Other BPO opportunities exist that can either Other BPO opportunities exist that can either information to telemarketers with foreign information to telemarketers with foreign build upon basic forms of BPO or be developed build upon basic forms of BPO or be developed accents. We anticipate that Tanzania would accents. We anticipate that Tanzania would independently. These include transactions services independently. These include transactions services face this same challenge. face this same challenge. such as invoicing and credit/debit card services. such as invoicing and credit/debit card services. Due to growing global threats of terrorism and nat- When considering BPO projects, the ICT sector in Due to growing global threats of terrorism and nat- When considering BPO projects, the ICT sector in ural disasters, an option for some remote locations Tanzania must remain wary of high-profile projects ural disasters, an option for some remote locations Tanzania must remain wary of high-profile projects is to become a disaster recovery center for firms that work theoretically, but may be more realistic at is to become a disaster recovery center for firms that work theoretically, but may be more realistic at operating in more sophisticated markets. a later stage of growth. One such project would be a operating in more sophisticated markets. a later stage of growth. One such project would be a

68 Zagada Markets Inc., 2002 68 Zagada Markets Inc., 2002 69 Interview with CEO of Helen IT System in St Lucia, October 12th, 2004 69 Interview with CEO of Helen IT System in St Lucia, October 12th, 2004

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FIGURE 32. OUTBOUND CALLS TO THE U.S. FIGURE 32. OUTBOUND CALLS TO THE U.S.

1.05 Zambia 1.40

0.64 Kenya 0.90

0.80 Uganda 1.15

0.95 Tanzania 0.95

0.41 Mauritius 0.53

0.23 South Africa 0.26 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60

Off-Peak (US$; evenings/weekends) To US Peak (US$/minute; daytime)

Cyber Park. Successful Cyber Parks are self-sufficient Cyber Park. Successful Cyber Parks are self-sufficient “towns” of technology that encompass residential BOX 6 Ebene cyber city - Mauritius “towns” of technology that encompass residential BOX 6 Ebene cyber city - Mauritius neighborhoods, shopping centers, technical universi- The ICT sector in Mauritius took a giant step forward on April 8, neighborhoods, shopping centers, technical universi- The ICT sector in Mauritius took a giant step forward on April 8, 2005 when the President of Mauritius and the Prime Minister of 2005 when the President of Mauritius and the Prime Minister of ties, research centers, business incubators and tech- India inaugurated the first Ebene Cyber Tower. The Cyber Tower ties, research centers, business incubators and tech- India inaugurated the first Ebene Cyber Tower. The Cyber Tower nologically modern business facilities. Cyber Parks is just one component of Mauritius’s ambitious plan to become a nologically modern business facilities. Cyber Parks is just one component of Mauritius’s ambitious plan to become a rely heavily on the sustained creation of significant Cyber Island and act as an ICT hub for Africa and the Indian rely heavily on the sustained creation of significant Cyber Island and act as an ICT hub for Africa and the Indian Ocean. Ebene Cyber City (Cyber City) is the flagship project of Ocean. Ebene Cyber City (Cyber City) is the flagship project of intellectual capital through universities, research cen- the program. The Cyber City is being developed by Business intellectual capital through universities, research cen- the program. The Cyber City is being developed by Business ters, and business incubators, all of which are costly Parks of Mauritius Ltd. (BPML), which also manages other ICT ters, and business incubators, all of which are costly Parks of Mauritius Ltd. (BPML), which also manages other ICT business parks. The presence of the Indian PM was due to the business parks. The presence of the Indian PM was due to the to develop and can take years to build. Given the commitment India made of a US$ 100 million line of credit to develop and can take years to build. Given the commitment India made of a US$ 100 million line of credit size and sophistication of the Tanzanian ICT sector, towards the development of the Cyber Island. size and sophistication of the Tanzanian ICT sector, towards the development of the Cyber Island. Tanzania would be challenged to provide not only Tanzania would be challenged to provide not only The Cyber City, which covers 172 acres, has several components. The Cyber City, which covers 172 acres, has several components. the requisite connectivity, but also the ICT profes- The project’s first landmark is the Cyber Tower, a 12 story, 42,274 the requisite connectivity, but also the ICT profes- The project’s first landmark is the Cyber Tower, a 12 story, 42,274 sionals required to implement such a project. sq. meters “intelligent” building. The Tower targets three sectors: busi- sionals required to implement such a project. sq. meters “intelligent” building. The Tower targets three sectors: business processing outsourcing, call center operations and software ness processing outsourcing, call center operations and software development. The Tower is linked to the SAEF optical fiber that con- development. The Tower is linked to the SAEF optical fiber that con- Due to the complexity of design and execution, suc- nects North America, Europe, South Africa, India and other countries. Due to the complexity of design and execution, suc- nects North America, Europe, South Africa, India and other countries. cessful Cyber parks require not only patience and cessful Cyber parks require not only patience and The Cyber City will also include a business zone for the construction The Cyber City will also include a business zone for the construction commitment from the country’s leadership, but also of individual buildings by ICT firms, a commercial center, a business commitment from the country’s leadership, but also of individual buildings by ICT firms, a commercial center, a business massive investments in infrastructure as can be seen class hotel, a knowledge center for offering educational courses, massive investments in infrastructure as can be seen class hotel, a knowledge center for offering educational courses, and a cyber village residential complex. In November, 2004, it and a cyber village residential complex. In November, 2004, it from the experience of the Cyber Park in Mauritius. was announced that an administrative section of the Cyber City from the experience of the Cyber Park in Mauritius. was announced that an administrative section of the Cyber City What is most important for Tanzania to learn from would be turned into a 10 story, 16,000 sq. meters Cyber Tower II What is most important for Tanzania to learn from would be turned into a 10 story, 16,000 sq. meters Cyber Tower II the Mauritius example is that economic growth was due to the demand for office space in the Cyber City. the Mauritius example is that economic growth was due to the demand for office space in the Cyber City. first driven by sugar, then textiles and tourism. Once Source: www.e-cybercity.mu first driven by sugar, then textiles and tourism. Once Source: www.e-cybercity.mu these sectors started generating significant revenues, these sectors started generating significant revenues, the government was able to push investment in new the government was able to push investment in new sectors such as financial services and the Cyber City. sectors such as financial services and the Cyber City. local economy, they are also broadly important as a local economy, they are also broadly important as a driver of individual prosperity. This section will driver of individual prosperity. This section will evaluate current SME adoption of ICT in Tanzania, evaluate current SME adoption of ICT in Tanzania, highlighting SMEs that are now using ICT to highlighting SMEs that are now using ICT to 5.5 BUILDING COMPETITIVE increase productivity and efficiency. 5.5 BUILDING COMPETITIVE increase productivity and efficiency. SMES SMES 5.5.1 Lack of SME Adoption 5.5.1 Lack of SME Adoption In each of the key sectors previously analyzed, the SMEs in Tanzania have been slow to adopt ICT, In each of the key sectors previously analyzed, the SMEs in Tanzania have been slow to adopt ICT, role of SMEs is critical. Given their impact on the even as a means for communication. In one survey, role of SMEs is critical. Given their impact on the even as a means for communication. In one survey,

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FIGURE 33. MEANS OF COMMUNICATION UTILIZED BY SMES FIGURE 33. MEANS OF COMMUNICATION UTILIZED BY SMES

120.0%

99.2% 100.0% 87.3% 80.0%

60.0% 50.0% Courier Percent 44.9%Fax 40.0% 30.5% 28.2%

20.0% 15.3% Computer Based Postal Mail 0.0% Telephone

Personal Delivery Face to Face

although 87.3% of SMEs used a telephone for surveyed SMEs in Tanzania have made no invest- although 87.3% of SMEs used a telephone for surveyed SMEs in Tanzania have made no invest- communication, only 28.2% used a computer-based ment in ICT.71 Of the sectors surveyed in this communication, only 28.2% used a computer-based ment in ICT.71 Of the sectors surveyed in this medium such as email.70 Indeed, more than 99% of study, SMEs in the tourism sector invested the medium such as email.70 Indeed, more than 99% of study, SMEs in the tourism sector invested the SME business takes place in person. See Figure 33. most. Since Tanzania’s export sectors are competing SME business takes place in person. See Figure 33. most. Since Tanzania’s export sectors are competing on simple comparative advantages, SMEs who par- on simple comparative advantages, SMEs who par- Though it does not indicate effective usage, anoth- ticipate in these sectors compete mostly on a low Though it does not indicate effective usage, anoth- ticipate in these sectors compete mostly on a low er meaningful measure of ICT adoption is the cost model. It is not unexpected that the tourism er meaningful measure of ICT adoption is the cost model. It is not unexpected that the tourism amount of investment in ICT made by SMEs. The sector has made the most investment in ICT since amount of investment in ICT made by SMEs. The sector has made the most investment in ICT since data in Figure 34 shows that more than 76% of it is creating a more complex, value-added offering. data in Figure 34 shows that more than 76% of it is creating a more complex, value-added offering.

FIGURE 34. ANNUAL TOTAL INVESTMENT IN ICT FIGURE 34. ANNUAL TOTAL INVESTMENT IN ICT

100 90

# of firms 40

20 12 8 8

0 0 88-1,358 1,552-4,074 4,365-10,816 US$

70 Kijo-Ringo, Natujwa Daniel, “Impact of Investment in and Utilization of Information and Communication Technologies on Market Extension: Overview of 70 Kijo-Ringo, Natujwa Daniel, “Impact of Investment in and Utilization of Information and Communication Technologies on Market Extension: Overview of Small and Medium Enterprises in Tanzania”, University of Dar es Salaam, November 2004 Small and Medium Enterprises in Tanzania”, University of Dar es Salaam, November 2004 71 Ibid 71 Ibid

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This data is not surprising. As discussed earlier, meeting in 2004 with Tanzanian SMEs. One issue This data is not surprising. As discussed earlier, meeting in 2004 with Tanzanian SMEs. One issue SMEs can be divided into two broad categories, that many firms raised was the difficulty of market- SMEs can be divided into two broad categories, that many firms raised was the difficulty of market- those that directly support export sectors and those ing and selling their products and services without those that directly support export sectors and those ing and selling their products and services without that are focused domestically. SMEs with a domes- a website. These firms, primarily retailers, use fairs, that are focused domestically. SMEs with a domes- a website. These firms, primarily retailers, use fairs, tic customer focus do not need to connect with exhibitions and conferences to show their goods, tic customer focus do not need to connect with exhibitions and conferences to show their goods, suppliers and customers overseas. Given the rela- and interested buyers increasingly wanted web suppliers and customers overseas. Given the rela- and interested buyers increasingly wanted web tively low usage of the internet within Tanzania, addresses for additional information, follow-up tively low usage of the internet within Tanzania, addresses for additional information, follow-up firms that target domestic consumers may not be communication and confirmation of the firms’ firms that target domestic consumers may not be communication and confirmation of the firms’ able to reach enough buyers to justify investing in legitimacy. The firms had very little information able to reach enough buyers to justify investing in legitimacy. The firms had very little information ICT hardware, training and maintenance. With the about a website’s set-up and maintenance costs, or ICT hardware, training and maintenance. With the about a website’s set-up and maintenance costs, or low connectivity of Tanzanian society, a compelling who could provide these types of services. low connectivity of Tanzanian society, a compelling who could provide these types of services. need to use email or other computer-based means need to use email or other computer-based means of communication does not exist. Many of these TDG selected seven businesses for a pilot project in of communication does not exist. Many of these TDG selected seven businesses for a pilot project in firms are making very rational decisions to not which TDG worked with the firms to design a web- firms are making very rational decisions to not which TDG worked with the firms to design a web- invest in ICT. site with logo, company profile, photos and categories invest in ICT. site with logo, company profile, photos and categories of products, reference Box 7 Tanzania Development of products, reference Box 7 Tanzania Development Even SMEs that have made investments in ICT Gateway (TDG) SME Website Pilot Project. Even SMEs that have made investments in ICT Gateway (TDG) SME Website Pilot Project. do not seem to be capturing their full benefits. In TDG recently had a one–year anniversary workshop do not seem to be capturing their full benefits. In TDG recently had a one–year anniversary workshop Figure 35 it is clear that computer investments are to measure the progress of the initiative. The results Figure 35 it is clear that computer investments are to measure the progress of the initiative. The results primarily being used for basic programs. This could have been mixed. There have been some challenges in primarily being used for basic programs. This could have been mixed. There have been some challenges in be attributed to a number of variables: a need for introducing traditional artisan businesses to internet be attributed to a number of variables: a need for introducing traditional artisan businesses to internet training, the cost of more complex software, limit- commerce. Several did not realize the importance of training, the cost of more complex software, limit- commerce. Several did not realize the importance of ed options for software in local content, limited checking their emails frequently and using the inter- ed options for software in local content, limited checking their emails frequently and using the inter- access in terms of connectivity, low awareness of net to respond and correspond with customers. As access in terms of connectivity, low awareness of net to respond and correspond with customers. As the value of more sophisticated programs—or a discussed in Section 4, online payments are still a the value of more sophisticated programs—or a discussed in Section 4, online payments are still a simple cost/benefit analysis that, again, does not challenge as wire transfers are the most common form simple cost/benefit analysis that, again, does not challenge as wire transfers are the most common form justify the additional investment in the current of payment and can be cost prohibitive. justify the additional investment in the current of payment and can be cost prohibitive. environment. environment. Though an internet presence can open a firm to Though an internet presence can open a firm to As part of its mission to understand these issues, international possibilities, small or low price point As part of its mission to understand these issues, international possibilities, small or low price point the Tanzania Development Gateway (TDG) held a orders may not be worth the transaction costs. the Tanzania Development Gateway (TDG) held a orders may not be worth the transaction costs.

FIGURE 35. COMPUTER USAGE FIGURE 35. COMPUTER USAGE

Production Control 6.1%

Inventory Management 9.5%

WWW 14.2%

Order Processing 20.3%

Email 20.9%

Bookkeeping 26.4%

Word Processing 45.9%

0% 10% 20% 30% 40% 50%

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BOX 7. Tanzania Development Gateway SME website pilot project BOX 7. Tanzania Development Gateway SME website pilot project

Marvelous Batiks Marvelous Batiks

The shining success of the TDG SME Website Pilot Project is Marvelous Batiks founded by Mrs. Flotea Massawe in June 1992. Mrs. The shining success of the TDG SME Website Pilot Project is Marvelous Batiks founded by Mrs. Flotea Massawe in June 1992. Mrs. Massawe was admittedly hesitant at first to put her designs on the internet as she feared that others would copy the Marvelous Batiks Massawe was admittedly hesitant at first to put her designs on the internet as she feared that others would copy the Marvelous Batiks designs. Today she is doing nearly all of her business online and even has wireless network at home and a person dedicated to checking designs. Today she is doing nearly all of her business online and even has wireless network at home and a person dedicated to checking emails and following up on electronic orders. Sales increased by approximately 30% after implementation, and Marvelous now operates emails and following up on electronic orders. Sales increased by approximately 30% after implementation, and Marvelous now operates a second shift to satisfy the increase in orders. She ships the order after she has received 50% of payment by wire transfer. a second shift to satisfy the increase in orders. She ships the order after she has received 50% of payment by wire transfer.

Afrika Sana Afrika Sana

Afrika Sana was established and officially registered in Tanzania in 1993 by two artists – Ailinda Sawe, a fashion designer and N.L. Afrika Sana was established and officially registered in Tanzania in 1993 by two artists – Ailinda Sawe, a fashion designer and N.L. Merinyo, a textile designer and multitalented artist. The two artists started to train youths with talent in batik designing on cotton cloth from Merinyo, a textile designer and multitalented artist. The two artists started to train youths with talent in batik designing on cotton cloth from local factories. This had the dual benefit of getting young people engaged in meaningful employment and supplying local garment makers local factories. This had the dual benefit of getting young people engaged in meaningful employment and supplying local garment makers with beautiful and quality batik textiles. The company specializes in art, crafts and fashion commissions, including special corporate art with beautiful and quality batik textiles. The company specializes in art, crafts and fashion commissions, including special corporate art pieces, official costumes for company executives and musical ensembles, theatrical costumes, campaigns and promotional outfits. pieces, official costumes for company executives and musical ensembles, theatrical costumes, campaigns and promotional outfits.

Afrika Sana has not seen an increase in sales that it can attribute to its website. The company primarily uses print media in Tanzania to Afrika Sana has not seen an increase in sales that it can attribute to its website. The company primarily uses print media in Tanzania to advertise its products. As most of its sales are in the domestic market and not bulk exports, this is the most appropriate marketing tool. advertise its products. As most of its sales are in the domestic market and not bulk exports, this is the most appropriate marketing tool.

Dina Flowers Dina Flowers

Dina Flowers was established in 1997 and currently has 16 employees with annual turnover of US$ 200,000. The firm provides fresh Dina Flowers was established in 1997 and currently has 16 employees with annual turnover of US$ 200,000. The firm provides fresh and artificial (dried and silk) floral arrangements, indoor plant placing and maintenance, landscape design and implementation, and gener- and artificial (dried and silk) floral arrangements, indoor plant placing and maintenance, landscape design and implementation, and general garden and lawn maintenance. Dina Flowers has been contacted by a few overseas individuals and firms wishing to send flowers al garden and lawn maintenance. Dina Flowers has been contacted by a few overseas individuals and firms wishing to send flowers within Tanzania, but the logistics of such transactions are difficult. In such cases the wire transfer fee for payment can offset any profit within Tanzania, but the logistics of such transactions are difficult. In such cases the wire transfer fee for payment can offset any profit made from the sale. Dina Flowers does use ICT frequently in the domestic market, as it receives 90% of its business over the mobile made from the sale. Dina Flowers does use ICT frequently in the domestic market, as it receives 90% of its business over the mobile phone. Buyers frequently send orders via SMS. A digital camera has also proved useful and supplanted the photo album as the preferred phone. Buyers frequently send orders via SMS. A digital camera has also proved useful and supplanted the photo album as the preferred method of showcasing products to customers. method of showcasing products to customers.

Source: OTF Group interview, www.tanzaniagateway.org, www.marveloustanzania.com, www.afrikasana.co.tz, www.tanzaniagate- Source: OTF Group interview, www.tanzaniagateway.org, www.marveloustanzania.com, www.afrikasana.co.tz, www.tanzaniagateway.org/dinaflowers way.org/dinaflowers

For instance, a single local artisan selling wood organization and as a way to transact across the For instance, a single local artisan selling wood organization and as a way to transact across the carvings or batiques on the internet from value chain. The former often requires a significant carvings or batiques on the internet from value chain. The former often requires a significant Tanzania will have to either pay for—or pass reorganization of work processes: incorporating effi- Tanzania will have to either pay for—or pass reorganization of work processes: incorporating effi- through—high international shipping costs that cient back up systems, knowledge-sharing databases, through—high international shipping costs that cient back up systems, knowledge-sharing databases, larger bulk exporters can spread across many and building seamless communications between larger bulk exporters can spread across many and building seamless communications between units. She will also need to coordinate payment divisions. The latter involves connecting and inte- units. She will also need to coordinate payment divisions. The latter involves connecting and inte- for the order, since the local Tanzania financial grating with others in the value chain to achieve for the order, since the local Tanzania financial grating with others in the value chain to achieve services structure does not have the capability to better time-to-market, improved coordination of services structure does not have the capability to better time-to-market, improved coordination of process credit card payments online. Expensive supply and demand, and excellent customer service. process credit card payments online. Expensive supply and demand, and excellent customer service. wire transfers are typically the payment solution wire transfers are typically the payment solution unless the firm has a trusted partner abroad. Improving Logistics to Reduce Costs. Examples of unless the firm has a trusted partner abroad. Improving Logistics to Reduce Costs. Examples of current Tanzanian SMEs using ICT to reduce oper- current Tanzanian SMEs using ICT to reduce operational costs may make the strongest case for the ational costs may make the strongest case for the 5.5.2 Potential for SMEs to Build technologies’ potential utility. Scandinavian Express 5.5.2 Potential for SMEs to Build technologies’ potential utility. Scandinavian Express Competitive Advantage Through ICT Services Ltd., is a passenger and cargo bus company Competitive Advantage Through ICT Services Ltd., is a passenger and cargo bus company A domestic or international focus is not always the based in Dar es Salaam. The firm operates a fleet of A domestic or international focus is not always the based in Dar es Salaam. The firm operates a fleet of primary driver of ICT benefit, and there are many 70 buses serving 18 points of destination. primary driver of ICT benefit, and there are many 70 buses serving 18 points of destination. domestic-focused SMEs that have successfully used Destinations include cities in all zones in Tanzania, domestic-focused SMEs that have successfully used Destinations include cities in all zones in Tanzania, ICT. One factor in determining ICT benefit is the as well as in Kenya, Uganda and Zambia. Passengers ICT. One factor in determining ICT benefit is the as well as in Kenya, Uganda and Zambia. Passengers degree to which the business model rests on outper- can choose from a range of three service classes. degree to which the business model rests on outper- can choose from a range of three service classes. forming competitors on levels of service and com- forming competitors on levels of service and complex logistics. There are many ways in which ICT Since 2003, the firm has implemented a series of plex logistics. There are many ways in which ICT Since 2003, the firm has implemented a series of can improve logistics, and the greatest benefits ICT initiatives to improve customer service and can improve logistics, and the greatest benefits ICT initiatives to improve customer service and accrue when they are incorporated both inside the logistics. The first was to computerize the ticketing accrue when they are incorporated both inside the logistics. The first was to computerize the ticketing

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system in Dar es Salaam. Using this system, manage- comprehensive database using Paradox, which it system in Dar es Salaam. Using this system, manage- comprehensive database using Paradox, which it ment can run passenger counts on each route served eventually migrated to Access. The database tracked ment can run passenger counts on each route served eventually migrated to Access. The database tracked to determine occupancy and utilization so that distribution, delivery, sales, returns and banking. to determine occupancy and utilization so that distribution, delivery, sales, returns and banking. schedules can be adjusted accordingly. The firm Upon implementing this new system, The Business schedules can be adjusted accordingly. The firm Upon implementing this new system, The Business plans to connect all of its regional office to the sys- Times realized savings of US$ 200-300 thousand plans to connect all of its regional office to the sys- Times realized savings of US$ 200-300 thousand tem in the near future. This year, Scandinavia also per month. It now has a dedicated staff of five peo- tem in the near future. This year, Scandinavia also per month. It now has a dedicated staff of five peo- introduced an online booking option for its passen- ple who monitor the system, performing audits and introduced an online booking option for its passen- ple who monitor the system, performing audits and gers, computer logs for fleet maintenance, and GPS reconciling discrepancies. The system has been such gers, computer logs for fleet maintenance, and GPS reconciling discrepancies. The system has been such systems to save time when locating a bus with a a success that a related company is being used to systems to save time when locating a bus with a a success that a related company is being used to mechanical malfunction. GPS also helps to keep design similar systems for other local newspapers, mechanical malfunction. GPS also helps to keep design similar systems for other local newspapers, drivers on track by making unscheduled stops visible. and the firm is handling the distribution services drivers on track by making unscheduled stops visible. and the firm is handling the distribution services for other newspapers. for other newspapers. Another firm that has used ICT to improve logistics Another firm that has used ICT to improve logistics is The Business Times. The Business Times is one of the Making Distance Irrelevant. The distance is The Business Times. The Business Times is one of the Making Distance Irrelevant. The distance leading newspapers in Tanzania and has been a first- between buyers and sellers has been a strong leading newspapers in Tanzania and has been a first- between buyers and sellers has been a strong mover in the use of ICT in the media industry. As comparative advantage since the beginning of mover in the use of ICT in the media industry. As comparative advantage since the beginning of early as the late 1980s, the company set up a network commerce. Historically, the time and effort early as the late 1980s, the company set up a network commerce. Historically, the time and effort to monitor the sales of its newspapers. The network required to move physical goods reduced–and to monitor the sales of its newspapers. The network required to move physical goods reduced–and covered ten regions in the country and used tele- often prevented - distant competition. As barriers covered ten regions in the country and used tele- often prevented - distant competition. As barriers phone lines to communicate. Two factors led the firm to movement and shipment reduced over time, phone lines to communicate. Two factors led the firm to movement and shipment reduced over time, to abandon this early initiative in 1992. First, the the difficulty of coordination and communication to abandon this early initiative in 1992. First, the the difficulty of coordination and communication cost of using phone lines became prohibitive. Second, still gave the edge to local firms. With the advent cost of using phone lines became prohibitive. Second, still gave the edge to local firms. With the advent the costs associated with maintaining a wide network of global ICT, distance has ceased to become a the costs associated with maintaining a wide network of global ICT, distance has ceased to become a at that time were high and rising. Since there were major barrier to entry of competition in all but at that time were high and rising. Since there were major barrier to entry of competition in all but few qualified professionals who could correct mis- the most niche products or markets. ICT have few qualified professionals who could correct mis- the most niche products or markets. ICT have takes, the company incurred large travel expenses to made it easier and less expensive to stay in touch takes, the company incurred large travel expenses to made it easier and less expensive to stay in touch send people to remote regions to make repairs. with customers and suppliers. As firm knowledge send people to remote regions to make repairs. with customers and suppliers. As firm knowledge becomes an increasing percentage of the ‘value- becomes an increasing percentage of the ‘value- In 1999 the company began to again consider how add’ of products, ICT also create significant value In 1999 the company began to again consider how add’ of products, ICT also create significant value to implement a cost-effective monitoring system, by allowing the free and instant transport of digi- to implement a cost-effective monitoring system, by allowing the free and instant transport of digi- since it had lost more than US$ 87,000 in the tized knowledge and insight. Geographically since it had lost more than US$ 87,000 in the tized knowledge and insight. Geographically Tanga region alone over two years. It developed a based clusters are still fundamentally important Tanga region alone over two years. It developed a based clusters are still fundamentally important

BOX 8. Improving logistics & making distance irrelevant: Issam International Ltd. BOX 8. Improving logistics & making distance irrelevant: Issam International Ltd.

Mr. Suwedi Kassim was well aware of the impact that ICT were beginning to have in Tanzania in the 1990s. Trained as an engineer, he Mr. Suwedi Kassim was well aware of the impact that ICT were beginning to have in Tanzania in the 1990s. Trained as an engineer, he gained his MBA and began competing in the burgeoning ICT sector. He launched three internet cafes, but soon faced fierce competition gained his MBA and began competing in the burgeoning ICT sector. He launched three internet cafes, but soon faced fierce competition and decided to shift to the retail sector, using his knowledge of ICT as an advantage. and decided to shift to the retail sector, using his knowledge of ICT as an advantage.

In June, 2000, he began operating Issam International Ltd., a used car and car parts business in Dar es Salaam. In its infancy the business In June, 2000, he began operating Issam International Ltd., a used car and car parts business in Dar es Salaam. In its infancy the business reflected the traditional car sales business model in Tanzania, as Mr. Kassim bought used cars and hired many workers to assist in the logis- reflected the traditional car sales business model in Tanzania, as Mr. Kassim bought used cars and hired many workers to assist in the logistics of the business, ranging from ordering, shipping, clearance and warehousing. Gradually over time, ICT was deployed as a tool to tics of the business, ranging from ordering, shipping, clearance and warehousing. Gradually over time, ICT was deployed as a tool to improve logistics and connect the outsourcing of supply worldwide. improve logistics and connect the outsourcing of supply worldwide.

Mr. Kassim has never been to Japan, but it is where his suppliers are located. Mr. Kassim visits online car and car part wholesalers in Mr. Kassim has never been to Japan, but it is where his suppliers are located. Mr. Kassim visits online car and car part wholesalers in Japan to order his supply online. He now researches and tracks his supply from shipping, clearance and warehousing online using the Japan to order his supply online. He now researches and tracks his supply from shipping, clearance and warehousing online using the car’s chassis number. While competitors of similar size can employ up to twenty people for these types of logistics, Issam International car’s chassis number. While competitors of similar size can employ up to twenty people for these types of logistics, Issam International needs only four. needs only four.

On the sales side of the business, Issam International operates a website on which customers can view all the details of his supply. This On the sales side of the business, Issam International operates a website on which customers can view all the details of his supply. This has greatly increased the reach of the business, not only within Tanzania, but also to other countries. Issam International has sold cars to has greatly increased the reach of the business, not only within Tanzania, but also to other countries. Issam International has sold cars to clients in Zimbabwe, Zambia and The Democratic Republic of Congo. Before developing the website the company averaged 2.93 car clients in Zimbabwe, Zambia and The Democratic Republic of Congo. Before developing the website the company averaged 2.93 car sales per month. Since the launch of the website in October, 2003, that number has grown by 96% to an average of 5.75 car sales per sales per month. Since the launch of the website in October, 2003, that number has grown by 96% to an average of 5.75 car sales per month. The business continues to grow steadily. The firm is currently having customized software developed that will further increase effi- month. The business continues to grow steadily. The firm is currently having customized software developed that will further increase efficiencies from ordering, shipping, clearance, and warehousing. ciencies from ordering, shipping, clearance, and warehousing.

75 I 75 I Source: OTF Group interview Source: OTF Group interview

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(in fact, some argue even more so). But this allows incubators to be financially viable until they (in fact, some argue even more so). But this allows incubators to be financially viable until they importance is increasingly tied to the intercon- can transition to a more profitable business model. importance is increasingly tied to the intercon- can transition to a more profitable business model. nections of human capital and other supply-side Many incubators eventually drive revenue by provid- nections of human capital and other supply-side Many incubators eventually drive revenue by provid- factors, versus the proximity to final markets. ing training and consulting to more established firms, factors, versus the proximity to final markets. ing training and consulting to more established firms, An illustration of this principle is found in Box 8 along with their original start-up clients. An illustration of this principle is found in Box 8 along with their original start-up clients. Improving Logistic & Making Distance Improving Logistic & Making Distance Irrelevant: Issam International Ltd. Some African countries have looked at technology Irrelevant: Issam International Ltd. Some African countries have looked at technology incubation centers to bolster their own ICT develop- incubation centers to bolster their own ICT develop- The examples of these exceptional firms–and many ment efforts. In 2001 Mauritius set up The National The examples of these exceptional firms–and many ment efforts. In 2001 Mauritius set up The National others–provide an encouraging contrast to the dis- Computer Board’s ICT Incubator Center to help others–provide an encouraging contrast to the dis- Computer Board’s ICT Incubator Center to help appointing data for ICT adoption among transform entrepreneurship into viable commercial appointing data for ICT adoption among transform entrepreneurship into viable commercial Tanzanian SMEs. The following section focuses on businesses and position the country as a “cyber Tanzanian SMEs. The following section focuses on businesses and position the country as a “cyber how support can be given to the private sector to island”.74 The center focuses on four areas: e-business, how support can be given to the private sector to island”.74 The center focuses on four areas: e-business, help drive this adoption more broadly. Internet content development, multimedia and bio- help drive this adoption more broadly. Internet content development, multimedia and bio- informatics, with start-ups generating businesses in informatics, with start-ups generating businesses in e-learning, medical transcription, software and mul- e-learning, medical transcription, software and mul- 5.6 STRENGTHENING timedia development, e-tourism and e-commerce, 5.6 STRENGTHENING timedia development, e-tourism and e-commerce, among others. It operates in partnership with the among others. It operates in partnership with the THE PRIVATE SECTOR University of Mauritius, but 60% of its funds come THE PRIVATE SECTOR University of Mauritius, but 60% of its funds come from the government, and the remaining balance is from the government, and the remaining balance is 5.6.1 Incubation driven by rental income. A major part of this initia- 5.6.1 Incubation driven by rental income. A major part of this initia- The availability of support services and financing tive’s success is the public-private cooperation in The availability of support services and financing tive’s success is the public-private cooperation in for start-ups and SMEs, particularly for technology- implementing a coordinated ICT policy. This part- for start-ups and SMEs, particularly for technology- implementing a coordinated ICT policy. This part- based businesses, is almost non-existent in Tanzania. nership is guided by a clear, broadly shared vision of based businesses, is almost non-existent in Tanzania. nership is guided by a clear, broadly shared vision of The failure to deliver funds and technical capabili- what Mauritius wants to become: it will not simply The failure to deliver funds and technical capabili- what Mauritius wants to become: it will not simply ties to small ventures is usually the largest impedi- be a technically proficient outsourcer for the global ties to small ventures is usually the largest impedi- be a technically proficient outsourcer for the global ment to their growth. This is a universal problem, economy, but it will also breed its own innovation. 75 ment to their growth. This is a universal problem, economy, but it will also breed its own innovation. 75 and there are successful models throughout the and there are successful models throughout the developing world that Tanzania could replicate. 5.6.2 Business Development Services developing world that Tanzania could replicate. 5.6.2 Business Development Services Another initiative that can strengthen SMEs and pro- Another initiative that can strengthen SMEs and pro- Business incubation is one way to target and Business incubation is one way to target and vide support for new business ventures is an invest- vide support for new business ventures is an invest- strengthen technology-based firms, or any type of strengthen technology-based firms, or any type of ment in Business Development Services (BDS). This ment in Business Development Services (BDS). This new business venture. Business incubators facilitate new business venture. Business incubators facilitate type of initiative begins with a deep understanding of type of initiative begins with a deep understanding of the process of enterprise development by helping the process of enterprise development by helping what SMEs in Tanzania need in terms of technical what SMEs in Tanzania need in terms of technical start-ups to survive and grow when they are most start-ups to survive and grow when they are most assistance. Access to financing is regularly cited as the assistance. Access to financing is regularly cited as the vulnerable. They provide a range of services, from vulnerable. They provide a range of services, from number one obstacle faced by new ventures in African number one obstacle faced by new ventures in African hands-on technical assistance and access to finance, hands-on technical assistance and access to finance, countries, but other areas of technical assistance also countries, but other areas of technical assistance also to support services and infrastructure such as office to support services and infrastructure such as office surface: (i) access to information (market information, surface: (i) access to information (market information, space and communication facilities.72 Although space and communication facilities.72 Although new processes and technologies), (ii) training on basic new processes and technologies), (ii) training on basic their core competency is providing access to SME their core competency is providing access to SME business skills and management skills, (iii) networking business skills and management skills, (iii) networking financing, they can be a potent mechanism for financing, they can be a potent mechanism for with the business community to form partnerships, with the business community to form partnerships, intermediating venture capital and establishing intermediating venture capital and establishing and (iv) consulting on new business plan preparation, and (iv) consulting on new business plan preparation, networks of investors.73 networks of investors.73 among others. among others. Incubators usually partner with academic institutions Incubators usually partner with academic institutions Tanzania can address these needs by developing an Tanzania can address these needs by developing an or research centers, as well as government agencies. or research centers, as well as government agencies. integrated National BDS Network that can impact integrated National BDS Network that can impact By being housed in a university campus, incubators By being housed in a university campus, incubators SMEs through clearly defined strategy, operations SMEs through clearly defined strategy, operations are better able to target young entrepreneurs and set are better able to target young entrepreneurs and set and partners. The Tanzania Chamber of Commerce, and partners. The Tanzania Chamber of Commerce, up partnerships with research centers that foster up partnerships with research centers that foster Industries and Trade is a good example of an imple- Industries and Trade is a good example of an imple- innovation. Sponsorship by government agencies innovation. Sponsorship by government agencies menting partner within this network. The network menting partner within this network. The network

72 NBIA www.nbia.org 72 NBIA www.nbia.org 73 Based on “Improving Competitiveness and Promoting Economic Diversification in the Caribbean: The Role of ICT”. 73 Based on “Improving Competitiveness and Promoting Economic Diversification in the Caribbean: The Role of ICT”. 74 Balancing Act New Update (2004), Issue 186. p. 2. http://ncb.intnet.mu/ncb/incubator/incubator_downloads/balancing-act_186.pdf 74 Balancing Act New Update (2004), Issue 186. p. 2. http://ncb.intnet.mu/ncb/incubator/incubator_downloads/balancing-act_186.pdf 75 Ibid. p.3 75 Ibid. p.3

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FIGURE 36. BDS SERVICES FIGURE 36. BDS SERVICES

BDS VISION: First point of reference for private sector

TRAINING INFORMATION FINANCE NETWORKING CONSULTANT MONITORING Objective: Build Objective: Provide Objective: Facilitate Objective: Create a capacity through and create relevant easier access to stronger regional Objective: Ensure training and information for financing and national quality of consultant mentoring private sector business community services Services: Services: Services: • Maintain database Services: Services: • Basic management • Library of basic of finance sources • Regular networking • Maintain techniques $ materials and terms events database of • Business idea • Custom research $ • Referral to • Mentoring program “certified” elaboration $ • Computer/ consultants for • Bulletin board consultants $ • Technical training $ internet access $ business plan • Showcase • Assist clients to • Regulatory issues $ • Company development speakers and access consultants • Accessing formation and • Connect clients regional BPC and structure financing $ regulatory issues with CEDP business winners engagement $ • Clustering and • Annual business • Monthly newsletter plan competition • Monitor quality of partnering award • BRD representative consultants and • Saving and in each office $ client satisfaction investment

Coordination with Partners • Maintain consolidated calendar of events, maintain database of regional services, refer clients to partners, establish regional working group, and ensure continuation of NGO and government projects

$ –potential services to be billed to clients

could serve as the first point of reference–or one- clear performance metrics in place to assess an could serve as the first point of reference–or one- clear performance metrics in place to assess an stop-shop—for the private sector. In this manner, it agency’s SME interventions, a continuous client stop-shop—for the private sector. In this manner, it agency’s SME interventions, a continuous client could be used proactively to help certain priority feedback system to drive satisfaction and innova- could be used proactively to help certain priority feedback system to drive satisfaction and innova- sectors, but would be capable of supporting all tion, and a commitment to some type of “fee for sectors, but would be capable of supporting all tion, and a commitment to some type of “fee for SMEs. As this study has highlighted, agribusiness service” model. This methodology has been sup- SMEs. As this study has highlighted, agribusiness service” model. This methodology has been sup- will be one of the sectors that initially needs careful ported by the recent work in northern Tanzania of will be one of the sectors that initially needs careful ported by the recent work in northern Tanzania of assistance as it transitions to more productive busi- the FAIDA SEP BDS support program, which cites assistance as it transitions to more productive busi- the FAIDA SEP BDS support program, which cites ness models, especially in rural and provincial areas. market distortion of subsidized BDS providers as ness models, especially in rural and provincial areas. market distortion of subsidized BDS providers as Given the existence of limited resources, service an issue.76 Given the existence of limited resources, service an issue.76 offerings could also be progressively introduced on a offerings could also be progressively introduced on a demand-driven basis as determined by the location Coordination with the government, private sector demand-driven basis as determined by the location Coordination with the government, private sector of each BDS (possibly starting with more informa- and the donor community is also crucial to ensure of each BDS (possibly starting with more informa- and the donor community is also crucial to ensure tion provision and moving towards advisory and an effective strategy and to ensure that no replica- tion provision and moving towards advisory and an effective strategy and to ensure that no replica- training needs). This network can act as the first tion takes place in service offerings or project activ- training needs). This network can act as the first tion takes place in service offerings or project activ- point of reference for training, information, consult- ities. A partnering scheme should enable a BDS point of reference for training, information, consult- ities. A partnering scheme should enable a BDS ing services, networking and access to finance, as post to, among other things: (i) maintain a consoli- ing services, networking and access to finance, as post to, among other things: (i) maintain a consoli- illustrated in Figure 36. dated calendar of events for SME, (ii) maintain a illustrated in Figure 36. dated calendar of events for SME, (ii) maintain a regional database of services, (iii) refer clients to regional database of services, (iii) refer clients to It is particularly important for BDS sites in rural partners and professional with key expertise, and It is particularly important for BDS sites in rural partners and professional with key expertise, and areas to partner with local human resources, not (iv) ensure continuation of other NGO and gov- areas to partner with local human resources, not (iv) ensure continuation of other NGO and gov- only to provide relevant services and solutions, but ernment projects. only to provide relevant services and solutions, but ernment projects. also to guarantee the sustainability of operations in also to guarantee the sustainability of operations in these provinces. Entrepreneurial expertise will also 5.6.3 An ICT Alliance these provinces. Entrepreneurial expertise will also 5.6.3 An ICT Alliance be a key part of upholding the legitimacy and suc- Business incubation and BDS services can address be a key part of upholding the legitimacy and suc- Business incubation and BDS services can address cess of these institutions. A system of checks and more general firm development, but the ICT sector cess of these institutions. A system of checks and more general firm development, but the ICT sector balances needs to be in place to drive the opera- must also actively engage SMEs and other sectors balances needs to be in place to drive the opera- must also actively engage SMEs and other sectors tional excellence of any BDS post: there must be to foster rational investment in ICT solutions. tional excellence of any BDS post: there must be to foster rational investment in ICT solutions.

76 FAIDA SEP Tanzania BDS Support Project Case Study 2002 76 FAIDA SEP Tanzania BDS Support Project Case Study 2002

Migrating to More Sophisticated Products and Services . 65 Migrating to More Sophisticated Products and Services . 65 WB tanzania text 2-27.qxd 2/27/07 11:51 AM Page 66 WB tanzania text 2-27.qxd 2/27/07 11:51 AM Page 66 Develop and sell specific Develop solutions to SMEs that highlight the economic that these solutions value despite the can provide, of variety overwhelming SMEs the overwhelming Given of SMEs, providers variety a “catego- must develop selling approach rized” business SME by towards type (manufacturing, com- services,mercial etc.) retail, serve SMEs, providers To must become ICT integra- of tors, not simple resellers individual technology and sell specific Develop solutions to SMEs that highlight the economic that these solutions value despite the can provide, of variety overwhelming SMEs the overwhelming Given of SMEs, providers variety a “catego- must develop selling approach rized” business SME by towards type (manufacturing, com- services,mercial etc.) retail, serve SMEs, providers To must become ICT integra- of tors, not simple resellers individual technology ■ ■ ■ ■ ■ ■ Understand their client’s busi- their client’s Understand better as partness processes of the solution selling process ICT solu- appropriate Design tions that demonstrate effi- to the ciency improvements business solutions to both business Sell leaders and IT implementers within the firm an industryDevelop associa- that tion of ICT providers the trustworthi-can validate bids to business of providers ness leaders busi- their client’s Understand better as partness processes of the solution selling process ICT solu- appropriate Design tions that demonstrate effi- to the ciency improvements business solutions to both business Sell leaders and IT implementers within the firm an industryDevelop associa- that tion of ICT providers the trustworthi-can validate bids to business of providers ness leaders ■ ■ ■ ■ ■ ■ ■ ■ Identify economically viable Identify solutions to rapid expansion of rural telephony and electricity services. local community Aggregate demand for services (e.g., schools, pay- local gov’t, phones, businesses) to reach critical mass. local government Mobilize authorities to partly in invest local telecom infrastructure and sell standard Develop ICT based solutions to com- tasks mon local government of local popu- Administration lation (births, deaths, ID notarycards, services, etc) (budgets and capital Finance investments) (publications, Outreach bulletins) economically viable Identify solutions to rapid expansion of rural telephony and electricity services. local community Aggregate demand for services (e.g., schools, pay- local gov’t, phones, businesses) to reach critical mass. local government Mobilize authorities to partly in invest local telecom infrastructure and sell standard Develop ICT based solutions to com- tasks mon local government of local popu- Administration lation (births, deaths, ID notarycards, services, etc) (budgets and capital Finance investments) (publications, Outreach bulletins) ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ National Government Local Government Large Business Small and Medium Enterprise National Government Local Government Large Business Small and Medium Enterprise Develop after-sales support Develop for National programs agencies Government aspect Learn ICT intensive Government of National operations agency’s cus- Develop/introduce software tomized continuous training Set-up mechanisms after-sales support Develop for National programs agencies Government aspect Learn ICT intensive Government of National operations agency’s cus- Develop/introduce software tomized continuous training Set-up mechanisms ■ ■ ■ ■ ■ ■ ■ ■

ICT alliance structure ICT alliance structure ICT Technology and Service Providers ICT Technology and Service Providers TABLE 7. TABLE 7. TABLE

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Improving Competitiveness and Increasing Economic Growth in Tanzania WB tanzania text 2-27.qxd 2/27/07 11:51 AM Page 67 WB tanzania text 2-27.qxd 2/27/07 11:51 AM Page 67 Develop a clear strategy Develop and policy to facilitate in ICT by investment SMEs on equip- breaks Tax e.g., ment import for equip- credits Tax e.g., ment and training costs with PS associa- Partner advice to tions to provide SMEs and ratings of ICT (BBB) providers a clear strategy Develop and policy to facilitate in ICT by investment SMEs on equip- breaks Tax e.g., ment import for equip- credits Tax e.g., ment and training costs with PS associa- Partner advice to tions to provide SMEs and ratings of ICT (BBB) providers Educators must work with must work Educators busi- to develop providers ness specific public semi- to nars and workshops train similar SME types on ICT usage on MIS Workshop e.g., manage- systems for retail ment on finan- Workshop e.g., and inventorycial software management with must work Educators busi- to develop providers ness specific public semi- to nars and workshops train similar SME types on ICT usage on MIS Workshop e.g., manage- systems for retail ment on finan- Workshop e.g., and inventorycial software management ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Introduce tax credits / incen- tax credits Introduce develop- for employee tives ment and training as is done in many countries import tariffs on tech- Reduce nology to facilitate further and upgrading of investment ICT. / incen- tax credits Introduce develop- for employee tives ment and training as is done in many countries import tariffs on tech- Reduce nology to facilitate further and upgrading of investment ICT. Develop partnerships with Develop and before ICT providers during the solution selling to large businesses process long-term, intensive, Build training rela- and customized tionships with large businesses training ses- group Regular on sions to new employees systems and applications training for sen- One-on-one ior leaders to help them rapidly integrate technology into their day-to-day activities courses as new ICT Refresher services within rolled-out are a business partnerships with Develop and before ICT providers during the solution selling to large businesses process long-term, intensive, Build training rela- and customized tionships with large businesses training ses- group Regular on sions to new employees systems and applications training for sen- One-on-one ior leaders to help them rapidly integrate technology into their day-to-day activities courses as new ICT Refresher services within rolled-out are a business ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Set-up task force with task force Set-up and educators to providers out standard identify and roll ICT solu- local government tions administrative, Remove and legal obsta- bureaucratic, cles to rural utility service expansion on stan- and agree Identify and ICT procedures dard efficien- solutions to improve cy of local government with task force Set-up and educators to providers out standard identify and roll ICT solu- local government tions administrative, Remove and legal obsta- bureaucratic, cles to rural utility service expansion on stan- and agree Identify and ICT procedures dard efficien- solutions to improve cy of local government Coordinate contextual train- Coordinate to ing with service providers train users of basic ICT equip- Usage ment for new installations and expansion of existing user base training in the use Specialized local government of standard ICT solutions contextual train- Coordinate to ing with service providers train users of basic ICT equip- Usage ment for new installations and expansion of existing user base training in the use Specialized local government of standard ICT solutions ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Review / amend current Review communications protocol to encourage ICT usages E-mail instead of paper- based memos data transfer, Electronic not paper-based ICT customized Purchase solutions to internal opera- (MIS sys- tional problems tems / common PBX systems, etc.) / amend current Review communications protocol to encourage ICT usages E-mail instead of paper- based memos data transfer, Electronic not paper-based ICT customized Purchase solutions to internal opera- (MIS sys- tional problems tems / common PBX systems, etc.) Coordinate contextual Coordinate training with service to train users providers ICT training on PC Basic and application usage training in the Specialized the use of ICT to improve efficiency of day-to-day tasks training on Specialized applications customize contextual Coordinate training with service to train users providers ICT training on PC Basic and application usage training in the Specialized the use of ICT to improve efficiency of day-to-day tasks training on Specialized applications customize ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Education and Basic, Tertiary, Specialized Training Government Policy, Regulation, and Public Infrastructure Education and Basic, Tertiary, Specialized Training Government Policy, Regulation, and Public Infrastructure

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The local ICT industry is now relatively weak, together to target different types of users or “con- The local ICT industry is now relatively weak, together to target different types of users or “con- which affects its ability to create value for the pri- sumers” of ICT. The Alliance would not only target which affects its ability to create value for the pri- sumers” of ICT. The Alliance would not only target vate sector and SMEs. Profitable contracts and SMEs and larger private sector firms, but it would vate sector and SMEs. Profitable contracts and SMEs and larger private sector firms, but it would engagements are usually found in the public sector, also include local and national government. This engagements are usually found in the public sector, also include local and national government. This either through government or donor initiatives. broadens the impact of ICT efforts in a structured either through government or donor initiatives. broadens the impact of ICT efforts in a structured There is little demand from the domestic private manner. See Table 7 for a more thorough explanation There is little demand from the domestic private manner. See Table 7 for a more thorough explanation sector for ICT solutions beyond an internet con- of the roles of each supplier and the benefits they can sector for ICT solutions beyond an internet con- of the roles of each supplier and the benefits they can nection or an off-the-shelf software program. One provide to each member of the Alliance. nection or an off-the-shelf software program. One provide to each member of the Alliance. of the more successful local ICT firms in Tanzania of the more successful local ICT firms in Tanzania is Soft-Tech. The firm’s client list is primarily gov- The supplier coordination is critical to ensuring is Soft-Tech. The firm’s client list is primarily gov- The supplier coordination is critical to ensuring ernment and donor organizations. that efforts are maximized. For example, SMEs ernment and donor organizations. that efforts are maximized. For example, SMEs need appropriate ICT solutions that hardware and need appropriate ICT solutions that hardware and General access and ability improvements will software providers can provide, but they also need General access and ability improvements will software providers can provide, but they also need assist in creating a more conducive environment training on new systems and applications. assist in creating a more conducive environment training on new systems and applications. for ICT adoption, as will increased awareness of Government has a role to play in ensuring that for ICT adoption, as will increased awareness of Government has a role to play in ensuring that ICT benefits. But the key will be to engage SMEs ICT tools are available and that taxes and regula- ICT benefits. But the key will be to engage SMEs ICT tools are available and that taxes and regula- and the private sector more broadly in a new way. tion are not overly burdensome to SME purchasers, and the private sector more broadly in a new way. tion are not overly burdensome to SME purchasers, The challenge becomes developing and selling for whom capital is typically scarce. The challenge becomes developing and selling for whom capital is typically scarce. specific solutions that highlight the economic specific solutions that highlight the economic value that these solutions can provide, despite This section has focused on the private sector, value that these solutions can provide, despite This section has focused on the private sector, the overwhelming variety of firms. One way to including SMEs and distinct economic sectors. The the overwhelming variety of firms. One way to including SMEs and distinct economic sectors. The address this challenge is to create an “ICT evolution of a developing economy also requires address this challenge is to create an “ICT evolution of a developing economy also requires Alliance.” supporting the government, particularly as it shifts Alliance.” supporting the government, particularly as it shifts roles as the private sector becomes more sophisti- roles as the private sector becomes more sophisti- The ICT Alliance would consist of hardware and cated. The next section will focus on the specific The ICT Alliance would consist of hardware and cated. The next section will focus on the specific software suppliers, ICT trainers and government in role of government in employing ICT effectively— software suppliers, ICT trainers and government in role of government in employing ICT effectively— its role as regulator. These entities can be viewed as not only for its own use, but also in building pri- its role as regulator. These entities can be viewed as not only for its own use, but also in building pri- the “supplier” side of the equation. They would work vate sector competitiveness. the “supplier” side of the equation. They would work vate sector competitiveness.

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improvement and investment. First, the GOT must improvement and investment. First, the GOT must 6 THE ROLE OF prioritize initiatives within the National ICT Policy, 6 THE ROLE OF prioritize initiatives within the National ICT Policy, rather than trying to address a prohibitively large rather than trying to address a prohibitively large range and number of issues simultaneously. As the range and number of issues simultaneously. As the GOVERNMENT: GOT determines these priorities, ICT initiatives that GOVERNMENT: GOT determines these priorities, ICT initiatives that benefit targeted sectors need to be at the top of the benefit targeted sectors need to be at the top of the BUILDING AND list. The GOT should also consider expanding the BUILDING AND list. The GOT should also consider expanding the authority and scope of the office of the National ICT authority and scope of the office of the National ICT CAPITALIZING ON Coordinator to capture the full benefits of ICT poli- CAPITALIZING ON Coordinator to capture the full benefits of ICT policy coordination and implementation. cy coordination and implementation.

MOMENTUM The breadth of the National ICT Policy is impres- MOMENTUM The breadth of the National ICT Policy is impres- sive, including leadership, infrastructure, legal and sive, including leadership, infrastructure, legal and regulatory framework, productive and service sec- regulatory framework, productive and service sec- This report has addressed the role of government in tors, and universal access. This reflects the relatively This report has addressed the role of government in tors, and universal access. This reflects the relatively the new competitiveness model as a partner and advanced state of the professional network. the new competitiveness model as a partner and advanced state of the professional network. supporter of the private sector. The same holds true Building on the ICT Policy document, the GOT is supporter of the private sector. The same holds true Building on the ICT Policy document, the GOT is for government’s specific involvement in supporting currently drafting a document entitled “Proposed for government’s specific involvement in supporting currently drafting a document entitled “Proposed the effective use of ICT. This section focuses on Implementation Strategies and Actions for the the effective use of ICT. This section focuses on Implementation Strategies and Actions for the how government can facilitate an ICT platform that National ICT Policy”. This document outlines how government can facilitate an ICT platform that National ICT Policy”. This document outlines increases productivity for the private sector, as well goals, strategies, actions, agencies and a timeframe increases productivity for the private sector, as well goals, strategies, actions, agencies and a timeframe as use ICT within the public sector to improve citi- for implementing the National ICT Policy. The as use ICT within the public sector to improve citi- for implementing the National ICT Policy. The zenship and governance. Mechanisms the GOT can political capital invested in this effort is commend- zenship and governance. Mechanisms the GOT can political capital invested in this effort is commend- use to promote this agenda include creating an able, but the document and its successor, National use to promote this agenda include creating an able, but the document and its successor, National actionable ICT Policy, adopting an informed role as ICT Policy Implementation Strategies, need to be actionable ICT Policy, adopting an informed role as ICT Policy Implementation Strategies, need to be regulator and actively using e-government solutions. more focused and actionable. regulator and actively using e-government solutions. more focused and actionable.

For example, the latter document is detailed and For example, the latter document is detailed and comprehensive, but covers ten different policy comprehensive, but covers ten different policy areas, each of which includes up to twenty different areas, each of which includes up to twenty different 6.1 NATIONAL ICT POLICY components of large scale goals and actions. The 6.1 NATIONAL ICT POLICY components of large scale goals and actions. The areas cover all aspects of ICT, ranging from back- areas cover all aspects of ICT, ranging from back- Tanzania has taken important first steps in docu- bone infrastructure to ICT company incubation to Tanzania has taken important first steps in docu- bone infrastructure to ICT company incubation to menting ICT policy, but there is room for policy the dangers of utilizing ICT to view pornography. menting ICT policy, but there is room for policy the dangers of utilizing ICT to view pornography. improvement. On the positive side, Tanzania was These policy areas are not ranked or prioritized, improvement. On the positive side, Tanzania was These policy areas are not ranked or prioritized, the first country in the East African Community to and the responsible parties, financial resources, and the first country in the East African Community to and the responsible parties, financial resources, and put in place a blueprint to guide the adoption and timeline are not explicit, making action on these put in place a blueprint to guide the adoption and timeline are not explicit, making action on these development of ICT in March, 2003, through the issues cumbersome. In order to capitalize on the development of ICT in March, 2003, through the issues cumbersome. In order to capitalize on the adoption of National Information and momentum and resources invested in formulating adoption of National Information and momentum and resources invested in formulating Communications Technologies Policy (National ICT policy, the GOT must play a more proactive Communications Technologies Policy (National ICT policy, the GOT must play a more proactive ICT Policy). The National ICT Policy’s vision is for role in prioritizing its goals, actions and resources. ICT Policy). The National ICT Policy’s vision is for role in prioritizing its goals, actions and resources. “Tanzania to become a hub of ICT infrastructure Without this filtering process, policy will remain “Tanzania to become a hub of ICT infrastructure Without this filtering process, policy will remain and ICT solutions that enhance sustainable socio-eco- unfocused and resources diluted among many proj- and ICT solutions that enhance sustainable socio-eco- unfocused and resources diluted among many proj- nomic development and accelerated poverty reduction ects of unequal value and contribution. nomic development and accelerated poverty reduction ects of unequal value and contribution. both nationally and globally”. both nationally and globally”. Furthermore, a necessary addition to ICT policy is a Furthermore, a necessary addition to ICT policy is a The objective of the National ICT Policy is to pro- more detailed and actionable plan on how the ICT The objective of the National ICT Policy is to pro- more detailed and actionable plan on how the ICT vide a national framework that enables the sector to platform will support the most productive sectors of vide a national framework that enables the sector to platform will support the most productive sectors of contribute towards achieving national development the economy. The current strategies focus the discus- contribute towards achieving national development the economy. The current strategies focus the discus- goals by exploiting ICT opportunities in a sustainable sion on issues of the ICT sector such as access, ability, goals by exploiting ICT opportunities in a sustainable sion on issues of the ICT sector such as access, ability, way. Digging deeper into the actual impact of gov- training, and regulatory policy, but they do not make way. Digging deeper into the actual impact of gov- training, and regulatory policy, but they do not make ernment interventions reveals several areas of potential the connection to how these changes will advance the ernment interventions reveals several areas of potential the connection to how these changes will advance the

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TABLE 8. Productive sector ICT strategies TABLE 8. Productive sector ICT strategies

Strategy Actions Strategy Actions ■ Prepare a sector specific prioritized action plan to ■ Collect information on e-readiness ■ Prepare a sector specific prioritized action plan to ■ Collect information on e-readiness address e-readiness recommendations address e-readiness recommendations

■ Establish, maintain and monitor ■ Take stock of usage of ICT in scope and span ■ Establish, maintain and monitor ■ Take stock of usage of ICT in scope and span e-readiness of all productive sectors in industrial productive sectors e-readiness of all productive sectors in industrial productive sectors

■ Revisit and review legislations to support and ■ Create a mechanism for ensuring ■ Revisit and review legislations to support and ■ Create a mechanism for ensuring sustain development of productive sectors sustainability of productive sectors sustain development of productive sectors sustainability of productive sectors

■ Encourage expansion and modernization ■ Attract investors in ICT infrastructure ■ Encourage expansion and modernization ■ Attract investors in ICT infrastructure of ICT infrastructure to support development of ICT infrastructure to support development productive sectors productive sectors

■ Establishment of showcases centers ■ Establish technology/ science parks ■ Establishment of showcases centers ■ Establish technology/ science parks of excellence that will reflect the of excellence that will reflect the impact of awareness of ICT. impact of awareness of ICT.

economic sectors that will be expected to employ Communications and Transport. The office lacks economic sectors that will be expected to employ Communications and Transport. The office lacks ICT to increase productivity and reduce poverty. financial and human resources, as well as authority ICT to increase productivity and reduce poverty. financial and human resources, as well as authority over other ministries and public institutions that over other ministries and public institutions that As Table 8 demonstrates, the National ICT Policy’s would benefit from deeper ICT expertise. This sug- As Table 8 demonstrates, the National ICT Policy’s would benefit from deeper ICT expertise. This sug- section on the Productive Sectors and how ICT will gests a lack of commitment. A more appropriate seat section on the Productive Sectors and how ICT will gests a lack of commitment. A more appropriate seat help them is vague and unfocused. The following for ICT decision-makers would be within the help them is vague and unfocused. The following for ICT decision-makers would be within the strategies and actions for the productive sectors are President’s or Vice President’s Office, where the ICT strategies and actions for the productive sectors are President’s or Vice President’s Office, where the ICT found in the document: Coordinator would have greater access to resources found in the document: Coordinator would have greater access to resources and greater ability to coordinate cross-ministerial and greater ability to coordinate cross-ministerial Several broad GOT initiatives, such as facilitating efforts. Increasing resources within the office is a Several broad GOT initiatives, such as facilitating efforts. Increasing resources within the office is a the development of a national payment system and starting place for increasing the efficacy of ICT poli- the development of a national payment system and starting place for increasing the efficacy of ICT poli- enacting legislation to provide a framework under cy. However, to truly coordinate ICT policy effective- enacting legislation to provide a framework under cy. However, to truly coordinate ICT policy effective- which business can operate, rest within the outlined ly, a network of ICT professionals should be created which business can operate, rest within the outlined ly, a network of ICT professionals should be created strategies. However, to fully realize the potential of throughout Ministries and public institutions. These strategies. However, to fully realize the potential of throughout Ministries and public institutions. These ICT in the sectors that matter most to Tanzania, the individuals would report to the ICT Coordination ICT in the sectors that matter most to Tanzania, the individuals would report to the ICT Coordination GOT and the private sector would need to come Office. Through these institution-level offices, ICT GOT and the private sector would need to come Office. Through these institution-level offices, ICT together choose priority sectors, understand these policy and ICT interventions in priority sectors could together choose priority sectors, understand these policy and ICT interventions in priority sectors could sectors’ unique needs and design the appropriate be strengthened through a bottom-up approach. sectors’ unique needs and design the appropriate be strengthened through a bottom-up approach. government support structures. The policy state- government support structures. The policy state- ments and economic sector targets in the National ments and economic sector targets in the National Strategy for Growth and Reduction of Poverty clear- Strategy for Growth and Reduction of Poverty clearly demonstrate that the GOT understands the ly demonstrate that the GOT understands the importance of adopting these principles of competi- 6.2 REGULATORY REGIME importance of adopting these principles of competi- 6.2 REGULATORY REGIME tiveness. Following this model, ICT policy and ICT REFORM tiveness. Following this model, ICT policy and ICT REFORM solutions for the economic sectors would be solutions for the economic sectors would be informed by the sectors and firms themselves. The Tanzania’s communications and broadcasting regu- informed by the sectors and firms themselves. The Tanzania’s communications and broadcasting regu- ICT Alliance could also be leveraged in this fashion lator is The Tanzania Communications Regulatory ICT Alliance could also be leveraged in this fashion lator is The Tanzania Communications Regulatory to assist in the development of appropriate policy. Authority (TCRA). It was established on to assist in the development of appropriate policy. Authority (TCRA). It was established on November 1, 2003, through a merger of the November 1, 2003, through a merger of the Two of the most important inputs into successful Tanzania Communications Commission and the Two of the most important inputs into successful Tanzania Communications Commission and the policy are commitment and coordination. Currently, Tanzania Broadcasting Commission. TCRA now policy are commitment and coordination. Currently, Tanzania Broadcasting Commission. TCRA now national ICT policy development and implementa- regulates telecommunications, broadcasting, ICT national ICT policy development and implementa- regulates telecommunications, broadcasting, ICT tion is owned by the undersized National ICT applications, provision of postal services, and man- tion is owned by the undersized National ICT applications, provision of postal services, and man- Coordination Office in the Ministry of agement of the radio spectrum. Catching up to the Coordination Office in the Ministry of agement of the radio spectrum. Catching up to the

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FIGURE 37. TCRA CONVERGED LICENSING FRAMEWORK FIGURE 37. TCRA CONVERGED LICENSING FRAMEWORK

Network Application Content Type Network Facilities Services Services Service Activity: Construction and ownership of Operation of Reselling or Provision of public electronic communication electronic procurement of content. infrastructure. communication services from networks in order network service to deliver operators. services.

Example: Earth stations, fixed links and Bandwidth Internet providers, Satellite cables, public payphone services, virtual mobile broadcasting, facilities, radio communications broadcasting provider, public broadcasting transmitters and links, satellite services, access cellular services, terrestrial, free to hubs, satellite control station, applications VolP, public air TV, terrestrial, space station, submarine cable services and payphones radio broadcasting landing center, switching space segment service, public and other electronic center, cover poles, ducts and service. switched data media. pits used in conjunction with services. other network facilities.

Market Segment: International National Regional District

Source: United Nationa & american society for Public Administration, “Benchmarking E-government: A Source: United Nationa & american society for Public Administration, “Benchmarking E-government: A Global Perspective”. 2001 Global Perspective”. 2001

issues facing regulators worldwide, the TCRA also about improving the efficiency of market economies, issues facing regulators worldwide, the TCRA also about improving the efficiency of market economies, needs to be vigilant in addressing new technologies and how changes in regulation can facilitate the needs to be vigilant in addressing new technologies and how changes in regulation can facilitate the and the issues they introduce into the competitive process”.77 Regulation and legislation should address and the issues they introduce into the competitive process”.77 Regulation and legislation should address landscape. In general, TCRA actions can have a how to create not only a more efficient market for landscape. In general, TCRA actions can have a how to create not only a more efficient market for major impact on ensuring that ICT is used effec- ICT firms, but also an environment in which ICT- major impact on ensuring that ICT is used effec- ICT firms, but also an environment in which ICT- tively by the private sector. enabled firms can effectively access the benefits of tively by the private sector. enabled firms can effectively access the benefits of ICT. In this context, regulation revisions being under- ICT. In this context, regulation revisions being under- As many countries have revised telecommunications taken by TCRA should be measured by how effective As many countries have revised telecommunications taken by TCRA should be measured by how effective regulations due to recent privatizations, the rapid they are in increasing the competitiveness of both the regulations due to recent privatizations, the rapid they are in increasing the competitiveness of both the proliferation of ICT has forced policy makers to ICT sector and other economic sectors. The TCRA proliferation of ICT has forced policy makers to ICT sector and other economic sectors. The TCRA re-evaluate their current regulatory regimes. Current and its predecessors have been historically slow in pro- re-evaluate their current regulatory regimes. Current and its predecessors have been historically slow in pro- debates focus on the convergence of broadcast viding regulation that is appropriate for the commer- debates focus on the convergence of broadcast viding regulation that is appropriate for the commer- media and telecommunications. Convergence refers cial environment. This was the case with VOIP, which media and telecommunications. Convergence refers cial environment. This was the case with VOIP, which to the extent to which similarities exist among IT, was outlawed instead of licensed until this year, to the extent to which similarities exist among IT, was outlawed instead of licensed until this year, telecommunications and other forms of media impeding massive reductions in the cost of telephony. telecommunications and other forms of media impeding massive reductions in the cost of telephony. (print and broadcast) in such areas as content, infra- (print and broadcast) in such areas as content, infrastructure and networks. A common example is an One of the first effective steps TCRA is taking to structure and networks. A common example is an One of the first effective steps TCRA is taking to internet site that is operated as a channel of a print address convergence is the drafting and adoption of internet site that is operated as a channel of a print address convergence is the drafting and adoption of or broadcast media company. Tanzania has chosen a converged licensing framework. One goal of the or broadcast media company. Tanzania has chosen a converged licensing framework. One goal of the the path of convergence, and now needs clear regu- framework is coordination with infrastructure efforts the path of convergence, and now needs clear regu- framework is coordination with infrastructure efforts lation as more brick and mortar companies delve so that the excess capacity of the institutionally lation as more brick and mortar companies delve so that the excess capacity of the institutionally into cyberspace as part of their business models. owned networks can be leased to customers. The into cyberspace as part of their business models. owned networks can be leased to customers. The converged licensing framework is also the framework converged licensing framework is also the framework The following perspective on convergence can be found under which VOIP was eventually allowed to be The following perspective on convergence can be found under which VOIP was eventually allowed to be in another InfoDev sponsored report on the issue: offered by ISPs in Tanzania. Under the framework, in another InfoDev sponsored report on the issue: offered by ISPs in Tanzania. Under the framework, “ICT and media convergence issues are primarily there are different types of licenses that are being “ICT and media convergence issues are primarily there are different types of licenses that are being

77 Henten, Samarajiva and Melody, “The Next Step for Telecom Regulation: ICT Convergence Regulation or Multisector Utilities Regulation?”, World Dialogue 77 Henten, Samarajiva and Melody, “The Next Step for Telecom Regulation: ICT Convergence Regulation or Multisector Utilities Regulation?”, World Dialogue on Regulation for Network Economies, 2003 on Regulation for Network Economies, 2003

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issued, see Figure 38. Each type is further divided by government can use ICT to deliver services to busi- issued, see Figure 38. Each type is further divided by government can use ICT to deliver services to busi- market segment and then classified as Individual, nesses and citizens more efficiently and cost-effec- market segment and then classified as Individual, nesses and citizens more efficiently and cost-effec- Class or Exempt, depending on the size of social and tively. This is particularly significant in terms of Class or Exempt, depending on the size of social and tively. This is particularly significant in terms of economic impact. The new licensing framework was creating an enabling environment that is conducive economic impact. The new licensing framework was creating an enabling environment that is conducive designed to simplify procedures, ensure regulatory to private sector growth. The IFC’s Doing Business designed to simplify procedures, ensure regulatory to private sector growth. The IFC’s Doing Business flexibility and efficiency, and encourage the entry of in 2005 Report, cited that Tanzania was among the flexibility and efficiency, and encourage the entry of in 2005 Report, cited that Tanzania was among the new operators, applications and services. five nations where government regulation and new operators, applications and services. five nations where government regulation and bureaucracy placed a huge tax on doing business. bureaucracy placed a huge tax on doing business. The next challenge that the TCRA may face is the For example, more than 50% of companies in The next challenge that the TCRA may face is the For example, more than 50% of companies in national infrastructure backbone that will need to be Tanzania reported that more than 10% of manag- national infrastructure backbone that will need to be Tanzania reported that more than 10% of manag- built by leveraging the ICT networks now owned by er’s time is spent dealing with government regula- built by leveraging the ICT networks now owned by er’s time is spent dealing with government regula- institutions such as the Tanzania Railway tion. Customs is one area that is particularly bur- institutions such as the Tanzania Railway tion. Customs is one area that is particularly bur- Corporation, the Tanzania Electric Supply Company dened by bureaucratic delay. Corporation, the Tanzania Electric Supply Company dened by bureaucratic delay. and Songo Songo Gas Supply. Moving forward, the and Songo Songo Gas Supply. Moving forward, the TCRA will need to create incentives for these stake- As Tanzania begins its evolution towards a more TCRA will need to create incentives for these stake- As Tanzania begins its evolution towards a more holders and new entrants to engage in commercial developed economy, the GOT will be the primary holders and new entrants to engage in commercial developed economy, the GOT will be the primary last mile build-out using existing and new fiber optic actor. As such, any ICT improvement that allows it last mile build-out using existing and new fiber optic actor. As such, any ICT improvement that allows it networks. In many countries, regulation often to cut costs, increase the speed of bureaucratic networks. In many countries, regulation often to cut costs, increase the speed of bureaucratic impedes the ability of networks to talk to each other, processes, and enhance transparency, will generate impedes the ability of networks to talk to each other, processes, and enhance transparency, will generate hand off communications and provide fair priced positive effects throughout the entire economy. The hand off communications and provide fair priced positive effects throughout the entire economy. The interconnectivity to increase competition. The GOT has been successful in adopting a few early e- interconnectivity to increase competition. The GOT has been successful in adopting a few early e- licensing and introduction of telecom services in government initiatives that have provided these licensing and introduction of telecom services in government initiatives that have provided these mainland Tanzania by Zantel, for example, demon- benefits, and its success can serve as a model for mainland Tanzania by Zantel, for example, demon- benefits, and its success can serve as a model for strates the positive impact that competition can have continued improvement. strates the positive impact that competition can have continued improvement. on price and service. Future opportunities will exist on price and service. Future opportunities will exist when Tanzania enhances its fiber optic international Governments can generally use ICT in three broad when Tanzania enhances its fiber optic international Governments can generally use ICT in three broad connectivity through the EASSY project or a compa- ways to improve their service delivery. First, they can connectivity through the EASSY project or a compa- ways to improve their service delivery. First, they can rable venture. Similar network collaboration that fos- improve the transparency of the business environ- rable venture. Similar network collaboration that fos- improve the transparency of the business environ- ters rather than hinders competition through fair ment by making data widely and freely available. ters rather than hinders competition through fair ment by making data widely and freely available. competitive regulation should be encouraged. This is achieved through the use of technology such competitive regulation should be encouraged. This is achieved through the use of technology such as database management and data entry systems, as database management and data entry systems, A final area of regulation that will become increas- which can manage data and increase the speed of A final area of regulation that will become increas- which can manage data and increase the speed of ingly important as ICT develops in Tanzania is transactions. This increased transparency means that ingly important as ICT develops in Tanzania is transactions. This increased transparency means that consumer rights regulation for the internet. This citizens have greater access to information, ranging consumer rights regulation for the internet. This citizens have greater access to information, ranging area includes privacy, governance, advertising and from descriptions of legislation, tax codes, bills pro- area includes privacy, governance, advertising and from descriptions of legislation, tax codes, bills pro- related regulatory issues. While these issues seem posed in parliament to interactive transactions, such related regulatory issues. While these issues seem posed in parliament to interactive transactions, such relatively tedious when compared to issues of infra- as applications for documents and benefits. See Box 9 relatively tedious when compared to issues of infra- as applications for documents and benefits. See Box 9 structure investment and convergence regulation, it for an example of the GOT’s investment in this type structure investment and convergence regulation, it for an example of the GOT’s investment in this type is important that they be addressed by the TCRA of ICT-enabled service. is important that they be addressed by the TCRA of ICT-enabled service. as, or preferably before, ICT becomes more perva- as, or preferably before, ICT becomes more perva- sive throughout the Tanzanian economy. Second, governments can help the business com- sive throughout the Tanzanian economy. Second, governments can help the business community become more efficient, make more munity become more efficient, make more informed decisions, and spend less time and money informed decisions, and spend less time and money on bureaucratic procedures when launching busi- on bureaucratic procedures when launching businesses and transacting goods and services. ICT can nesses and transacting goods and services. ICT can 6.3 E-GOVERNMENT help government simplify transactions and regula- 6.3 E-GOVERNMENT help government simplify transactions and regulatory compliance, once the internal commitment for tory compliance, once the internal commitment for The movement towards digitizing government these changes exists. The movement towards digitizing government these changes exists. operations and using the internet as a medium for operations and using the internet as a medium for service provision and extension has been loosely One area that is currently under revision is the gov- service provision and extension has been loosely One area that is currently under revision is the gov- described as “e-government.” In the same way that ernment’s procurement services. Government can described as “e-government.” In the same way that ernment’s procurement services. Government can private sector firms use ICT to increase productivity, use ICT to efficiently link its own need for services private sector firms use ICT to increase productivity, use ICT to efficiently link its own need for services

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This new system is expected to broaden the base of This new system is expected to broaden the base of BOX 9. The parliamentary on-line bidders and suppliers worldwide as firms will be BOX 9. The parliamentary on-line bidders and suppliers worldwide as firms will be information system able to subscribe to receive tender alerts based on a information system able to subscribe to receive tender alerts based on a submitted business profile of the supplier. The submitted business profile of the supplier. The The Parliament of Tanzania is established by the Constitution of GOT expects a savings of 60% once the system is The Parliament of Tanzania is established by the Constitution of GOT expects a savings of 60% once the system is the United Republic of Tanzania. The citizens elect the Members the United Republic of Tanzania. The citizens elect the Members of Parliament (MP) every five years. The structure, composition, fully implemented. Suppliers will be able to view of Parliament (MP) every five years. The structure, composition, fully implemented. Suppliers will be able to view powers and functions of Parliament are also described by the summaries of all tender notices for free, but the full powers and functions of Parliament are also described by the summaries of all tender notices for free, but the full Constitution. text of tender notices (full bidding documents) will Constitution. text of tender notices (full bidding documents) will The Parliamentary overview process generates a large amount of only be available for a set fee, since the government The Parliamentary overview process generates a large amount of only be available for a set fee, since the government information through different media. Over time, expeditious and generates significant revenues from selling bidding information through different media. Over time, expeditious and generates significant revenues from selling bidding accurate retrieval of this information became a tedious assign- accurate retrieval of this information became a tedious assign- ment. In order to promote good governance, accountability and documents. However, bidding documents will be ment. In order to promote good governance, accountability and documents. However, bidding documents will be transparency, as well as to facilitate sharing of large amounts of available for local firms at no cost or at a lower transparency, as well as to facilitate sharing of large amounts of available for local firms at no cost or at a lower Parliamentary outputs with the general public, the government price than for international firms. Due to the lack Parliamentary outputs with the general public, the government price than for international firms. Due to the lack designed a robust information system. The Parliamentary On-Line designed a robust information system. The Parliamentary On-Line Information Systems (POLIS) is the on-line home of Parliament. of an online payment system, purchasing the bid- Information Systems (POLIS) is the on-line home of Parliament. of an online payment system, purchasing the bid- The home page has a navigation panel whose links filter infor- ding documents will be done offline via wire bank The home page has a navigation panel whose links filter infor- ding documents will be done offline via wire bank mation that is stored in different modules of POLIS. The system mation that is stored in different modules of POLIS. The system constitutes the following four integrated modules: transfer, cash or check. constitutes the following four integrated modules: transfer, cash or check.

Parliamentary Acts & Documents Management System: This mod- Third, investments in information management Parliamentary Acts & Documents Management System: This mod- Third, investments in information management ule has an inbuilt retrieval mechanism to facilitate the overall ule has an inbuilt retrieval mechanism to facilitate the overall management of statutes and other parliamentary documents, and data integration within and between agencies management of statutes and other parliamentary documents, and data integration within and between agencies including standards. can significantly improve the quality of government including standards. can significantly improve the quality of government

Members of Parliament Profile Database System: The module is services. This is true for both back office and con- Members of Parliament Profile Database System: The module is services. This is true for both back office and con- used for maintaining bio-data for Members of Parliament. It pro- stituent-facing processes, and can translate into used for maintaining bio-data for Members of Parliament. It pro- stituent-facing processes, and can translate into vides a unique solution for searching MP’s by name or constituen- powerful cost and time savings. The GOT’s use of vides a unique solution for searching MP’s by name or constituen- powerful cost and time savings. The GOT’s use of cy. There are also reports presenting MP’s by political party, cy. There are also reports presenting MP’s by political party, region, gender and other parameters. ICT to upgrade its payroll system generated an region, gender and other parameters. ICT to upgrade its payroll system generated an immediate return by catching more than 6,000 immediate return by catching more than 6,000 Bill Tracking System: This module keeps track of each bill from Bill Tracking System: This module keeps track of each bill from the time of submission to the Parliament to when it is assented. It ghost workers. These technologies can also be used the time of submission to the Parliament to when it is assented. It ghost workers. These technologies can also be used is intended to show the efficiency of the bill discussion process to communicate across internal boundaries, such as is intended to show the efficiency of the bill discussion process to communicate across internal boundaries, such as before bills become acts. sharing relevant data about changes in citizen pro- before bills become acts. sharing relevant data about changes in citizen pro- Session Management System: The Session Management module files. When a person registers for an identity card Session Management System: The Session Management module files. When a person registers for an identity card is used to store the distilled Questions and Answers as presented is used to store the distilled Questions and Answers as presented in the Parliament and link them to the assigned unique identifier in the Parliament and link them to the assigned unique identifier of the individual MP’s. In addition, the system is used to store of the individual MP’s. In addition, the system is used to store the decomposed sections of various documents. BOX 10. GOT increases efficiencies the decomposed sections of various documents. BOX 10. GOT increases efficiencies

POLIS has other features such as the ability to create different in Human Resource Management POLIS has other features such as the ability to create different in Human Resource Management information views for different users, and to restrict information information views for different users, and to restrict information from some groups of users. There is an offline system, available In 1997, the GOT began upgrading its payroll system, which from some groups of users. There is an offline system, available In 1997, the GOT began upgrading its payroll system, which on CD, which enables users to access archives of selected parts was viewed as outdated, not Y2K compliant, and insecure. The on CD, which enables users to access archives of selected parts was viewed as outdated, not Y2K compliant, and insecure. The of the system and serves stakeholder segments that are not direct- initiative was a joint venture between The President’s Office – of the system and serves stakeholder segments that are not direct- initiative was a joint venture between The President’s Office – ly connected to the internet. Public Service Management and The Ministry of Finance. The ini- ly connected to the internet. Public Service Management and The Ministry of Finance. The initial upgrade was a collection of HR data, but continuous tial upgrade was a collection of HR data, but continuous Source: OTF Group interview, www.parliament.go.tz. advances have led to the processing of a payroll of 290,000 Source: OTF Group interview, www.parliament.go.tz. advances have led to the processing of a payroll of 290,000 public employees since April 2000 at a monthly average of US$ public employees since April 2000 at a monthly average of US$ 13 million. During the upgrade, the system paid for itself by 13 million. During the upgrade, the system paid for itself by catching 6,000 ghost workers. The GOT used the correspon- catching 6,000 ghost workers. The GOT used the correspon- with private sector suppliers, such as the potential ding savings to recruit 600 new teachers, the largest group on with private sector suppliers, such as the potential ding savings to recruit 600 new teachers, the largest group on plan for a digital market being considered by the the public payroll. plan for a digital market being considered by the the public payroll.

Central Tender Board. The Economic and Social Current improvements to the system include new printers that will Central Tender Board. The Economic and Social Current improvements to the system include new printers that will Research Foundation, the Tanzania Development be able to print statutory payroll information and HR management Research Foundation, the Tanzania Development be able to print statutory payroll information and HR management Gateway and the Central Tender Board are collabo- information in 2-3 days instead of 2-3 weeks and the submission Gateway and the Central Tender Board are collabo- information in 2-3 days instead of 2-3 weeks and the submission of payroll data electronically. The 1.5 ton printers will increase of payroll data electronically. The 1.5 ton printers will increase rating to create a unique, open source-based accountability as Heads of Departments and Line Mangers will rating to create a unique, open source-based accountability as Heads of Departments and Line Mangers will dgMarket software to facilitate the government’s receive HR and payroll reports for verification. Historically, line dgMarket software to facilitate the government’s receive HR and payroll reports for verification. Historically, line managers had no information on the salary levels of their employ- managers had no information on the salary levels of their employ- e-procurement system. Although not yet complete, ees and no automatic verification that vacant positions were e-procurement system. Although not yet complete, ees and no automatic verification that vacant positions were the system will eventually allow suppliers to search removed from the payroll. The submission of the payroll electroni- the system will eventually allow suppliers to search removed from the payroll. The submission of the payroll electroni- for tender opportunities, provide a facility for con- cally will also reduce data input error. for tender opportunities, provide a facility for con- cally will also reduce data input error. tract and profiles registration, and send out tender Source: OTF Group interview tract and profiles registration, and send out tender Source: OTF Group interview alerts based on GOT requirements. alerts based on GOT requirements.

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FIGURE 38. E-GOVERNMENT STAGE VS. CAPACITY, SELECTED AFRICAN FIGURE 38. E-GOVERNMENT STAGE VS. CAPACITY, SELECTED AFRICAN COUNTRIES 2001 COUNTRIES 2001

3.0

2.5

2.0

1.5 South Africa

1.0 Kenya Tanzania Mauritius

E-Government Capacity Zambia 0.5 Uganda

0.0 Emerging Enhanced Interactive Transactional Seamless Actual Stage of E-Government

Tanzania Uganda Kenya Mauritius South Africa Zambia

with a new address, for example, those updates instant access to any service in a “unified package.” with a new address, for example, those updates instant access to any service in a “unified package.” could automatically be shared with the revenue This stage, where ministerial and departmental could automatically be shared with the revenue This stage, where ministerial and departmental authority (for tax purposes) and the interior min- lines are irrelevant, has yet to be reached by any authority (for tax purposes) and the interior min- lines are irrelevant, has yet to be reached by any istry (for census planning). country. Tanzania is ranked with Kenya, Uganda istry (for census planning). country. Tanzania is ranked with Kenya, Uganda and Zambia in the enhanced stage. and Zambia in the enhanced stage. The United Nations has compiled e-government The United Nations has compiled e-government data that allows governments to benchmark their The United Nations survey concluded that Africa data that allows governments to benchmark their The United Nations survey concluded that Africa performance against other nations, and it is a useful has the lowest regional e-government capacity index performance against other nations, and it is a useful has the lowest regional e-government capacity index measure of the GOT’s progress. of all global regions at 0.84. The UN e-government measure of the GOT’s progress. of all global regions at 0.84. The UN e-government capacity index is comprised of measures of a country’s capacity index is comprised of measures of a country’s According to the United Nations, there are 5 stages web presence, telecommunications infrastructure, and According to the United Nations, there are 5 stages web presence, telecommunications infrastructure, and of e-government: emerging, enhanced, interactive, human capital. The metrics, conceived by the UN, of e-government: emerging, enhanced, interactive, human capital. The metrics, conceived by the UN, transactional and seamless.78 Countries with which compare a government’s potential progress in e- transactional and seamless.78 Countries with which compare a government’s potential progress in e- emerging presence have a formal, but limited web government given its access to connectivity with its emerging presence have a formal, but limited web government given its access to connectivity with its presence in the form of independent government achieved progress, are shown in Figure 39. Tanzania presence in the form of independent government achieved progress, are shown in Figure 39. Tanzania websites, with static organizational or political almost exactly reflects Africa’s performance, with a websites, with static organizational or political almost exactly reflects Africa’s performance, with a information. An enhanced presence is defined by score of 0.83. Among the African comparison coun- information. An enhanced presence is defined by score of 0.83. Among the African comparison coun- an increased number of government sites with tries, Uganda scores lower at 0.46, with Zambia an increased number of government sites with tries, Uganda scores lower at 0.46, with Zambia more specialized information and with links to nearby at 0.75. South Africa is clearly beyond the more specialized information and with links to nearby at 0.75. South Africa is clearly beyond the other government pages. Countries enter the inter- other African countries at 1.56. For context, coun- other government pages. Countries enter the inter- other African countries at 1.56. For context, coun- active stage when their websites allow for formal tries such as Belgium and Denmark are in the interactive stage when their websites allow for formal tries such as Belgium and Denmark are in the inter- interactions such as discussion areas and the search active stage, averaging 2.36, and France and Spain interactions such as discussion areas and the search active stage, averaging 2.36, and France and Spain of specialized databases. Countries with transac- are at the transactional stage. of specialized databases. Countries with transac- are at the transactional stage. tional presence have government websites that tional presence have government websites that allow users to complete secure transactions such as As these and other metrics make clear, despite the allow users to complete secure transactions such as As these and other metrics make clear, despite the obtaining visas and licenses, as well as pay utility anecdotal progress in Tanzania, there is still signifi- obtaining visas and licenses, as well as pay utility anecdotal progress in Tanzania, there is still signifi- bills and taxes. Digital signatures can be recognized cant work to be done in capturing the true value of bills and taxes. Digital signatures can be recognized cant work to be done in capturing the true value of for procurement of government contracts. Lastly, digitizing government service. The individual for procurement of government contracts. Lastly, digitizing government service. The individual seamless or fully integrated e-governments allow for charged with directing Management Information seamless or fully integrated e-governments allow for charged with directing Management Information

78 United Nations & American Society for Public Administration “ Benchmarking E-government: A Global Perspective” , 2001 78 United Nations & American Society for Public Administration “ Benchmarking E-government: A Global Perspective” , 2001

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Systems and e-government sits within the President’s continue to fall into three primary categories of out- Systems and e-government sits within the President’s continue to fall into three primary categories of out- Office, reflecting the seriousness of Tanzania’s com- puts: transparency (relevant data, widely and freely Office, reflecting the seriousness of Tanzania’s com- puts: transparency (relevant data, widely and freely mitment. The next step is for the government to available), simplicity (streamlined procedures for pri- mitment. The next step is for the government to available), simplicity (streamlined procedures for pri- concentrate on e-government reforms that will have vate sector transactions), and information efficiency concentrate on e-government reforms that will have vate sector transactions), and information efficiency the largest impact on the ability of firms to compete. (seamless integration of data, within and between the largest impact on the ability of firms to compete. (seamless integration of data, within and between The value of these reforms is broad, but they will government agencies). The value of these reforms is broad, but they will government agencies).

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conducting business. This will require investing in a conducting business. This will require investing in a 7. CONCLUSION broad ICT platform, as well as business development 7. CONCLUSION broad ICT platform, as well as business development services that particularly target the SMEs that domi- services that particularly target the SMEs that domi- nate the economy. nate the economy.

As this study has tried to capture, the challenges to ICT have a critical role to play in achieving growth As this study has tried to capture, the challenges to ICT have a critical role to play in achieving growth Tanzanian growth and competitiveness are tremen- and competitiveness in Tanzania, but they are not a Tanzanian growth and competitiveness are tremen- and competitiveness in Tanzania, but they are not a dous. Tanzania is burdened by an economy that panacea. ICT are an enabler of competitive advan- dous. Tanzania is burdened by an economy that panacea. ICT are an enabler of competitive advan- generates very low GDP per capita and few com- tage and operational efficiency for firms, but they generates very low GDP per capita and few com- tage and operational efficiency for firms, but they petitive exports. The goal for Tanzanian leaders are informed by policies, infrastructure and strate- petitive exports. The goal for Tanzanian leaders are informed by policies, infrastructure and strate- must be to adopt a new economic growth model gies that government and the private sector help to must be to adopt a new economic growth model gies that government and the private sector help to that increases prosperity for the average citizen. create. The GOT has significant work to do before that increases prosperity for the average citizen. create. The GOT has significant work to do before ICT can be a true competitive asset in Tanzania. At ICT can be a true competitive asset in Tanzania. At Achieving this goal will not be easy. Tanzania will this moment, there are no clear competitive strate- Achieving this goal will not be easy. Tanzania will this moment, there are no clear competitive strate- need to break from its traditional mode of compe- gies guiding the growth of key sectors. The current need to break from its traditional mode of compe- gies guiding the growth of key sectors. The current tition, exporting natural resources as commodities ICT platform is weak and must be upgraded. tition, exporting natural resources as commodities ICT platform is weak and must be upgraded. while capturing little value. The country must learn Access to telephony and the internet is very limit- while capturing little value. The country must learn Access to telephony and the internet is very limit- to replace this cycle of poverty with a virtuous cycle ed, in comparison to other countries in Africa and to replace this cycle of poverty with a virtuous cycle ed, in comparison to other countries in Africa and based on competitive advantages. In this new cycle, beyond. Firms’ ability to use relevant ICT is also based on competitive advantages. In this new cycle, beyond. Firms’ ability to use relevant ICT is also increasing wealth for the average citizen is fueled by lacking, primarily due to low levels of secondary increasing wealth for the average citizen is fueled by lacking, primarily due to low levels of secondary the sustained capacity to build and export complex education and training. SME usage is particularly the sustained capacity to build and export complex education and training. SME usage is particularly products and services. The cycle drives individual low, and while it may be a rational firm-level deci- products and services. The cycle drives individual low, and while it may be a rational firm-level deci- prosperity because it depends on increasing levels sion, it is also a function of the lack of coordina- prosperity because it depends on increasing levels sion, it is also a function of the lack of coordina- of productivity and innovation, which can only be tion of ICT actors in supporting these firms. of productivity and innovation, which can only be tion of ICT actors in supporting these firms. achieved by investing in human capital. While tak- achieved by investing in human capital. While taking a broad view of Tanzanian competitiveness, this One tension point of this study is that the real ing a broad view of Tanzanian competitiveness, this One tension point of this study is that the real report has specifically explored the role of ICT in inputs to economic transformation range from the report has specifically explored the role of ICT in inputs to economic transformation range from the creating this virtuous circle. specific and measurable (increasing connectivity) to creating this virtuous circle. specific and measurable (increasing connectivity) to the psychological and often messy (adopting a new the psychological and often messy (adopting a new Should Tanzania’s leaders choose this new model of competitiveness mindset). This journey depends on Should Tanzania’s leaders choose this new model of competitiveness mindset). This journey depends on competition, they will need to make difficult choices. ICT, but it also depends on increased levels of competition, they will need to make difficult choices. ICT, but it also depends on increased levels of They will need to focus scarce resources on where trust, creativity and leadership from disparate parts They will need to focus scarce resources on where trust, creativity and leadership from disparate parts Tanzania can compete internationally. A construc- of Tanzanian society. It will require that people Tanzania can compete internationally. A construc- of Tanzanian society. It will require that people tive public/private sector dialogue will be a first step think differently, and then act differently. This shift tive public/private sector dialogue will be a first step think differently, and then act differently. This shift in analyzing opportunities and evaluating the capac- is difficult for all countries, but history counters in analyzing opportunities and evaluating the capac- is difficult for all countries, but history counters ity of Tanzanian firms to compete in global markets. that it is possible. The timeline can vary widely, ity of Tanzanian firms to compete in global markets. that it is possible. The timeline can vary widely, This study suggests that Tanzania start this discus- however, often driven by these less tangible factors. This study suggests that Tanzania start this discus- however, often driven by these less tangible factors. sion in sectors that currently compete on compara- At the end of the day, it will require a delicate bal- sion in sectors that currently compete on compara- At the end of the day, it will require a delicate bal- tive advantages, but where building new competi- ance of both patience and impatience from all tive advantages, but where building new competi- ance of both patience and impatience from all tive advantages is a distinct possibility, particularly stakeholders, including Tanzanian citizens. tive advantages is a distinct possibility, particularly stakeholders, including Tanzanian citizens. with targeted, relevant, cost-effective investments in with targeted, relevant, cost-effective investments in ICT. Opportunities to use ICT to create value- The recommendations that follow focus on using ICT. Opportunities to use ICT to create value- The recommendations that follow focus on using added products for niche markets exist in the coffee, ICT to build more productive Tanzanian firms, to added products for niche markets exist in the coffee, ICT to build more productive Tanzanian firms, to cashews, minerals and tourism sectors. help create an environment that enables competi- cashews, minerals and tourism sectors. help create an environment that enables competitiveness and growth. Given the nature of the study, tiveness and growth. Given the nature of the study, Increasing firm productivity is not just an exercise for they are biased towards actions that can be imple- Increasing firm productivity is not just an exercise for they are biased towards actions that can be imple- exporting firms, although they are vital to generating mented in the relative short-term by the govern- exporting firms, although they are vital to generating mented in the relative short-term by the govern- the foreign exchange that drives economic growth. ment and its development partners. It is not an the foreign exchange that drives economic growth. ment and its development partners. It is not an Domestically focused firms must also adopt a new exhaustive list, but strives to be a useful input into Domestically focused firms must also adopt a new exhaustive list, but strives to be a useful input into competitiveness model. These firms must also seek an ongoing dialogue about ICT and Tanzanian competitiveness model. These firms must also seek an ongoing dialogue about ICT and Tanzanian out new opportunities and more efficient means of competitiveness. out new opportunities and more efficient means of competitiveness.

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In the coffee sector, the first steps are being taken In the coffee sector, the first steps are being taken 8. RECOMMENDATIONS towards a more liberalized market structure with the 8. RECOMMENDATIONS towards a more liberalized market structure with the adoption of a “second window” for direct export adoption of a “second window” for direct export sales, rather than the state-run auction. Firms that sales, rather than the state-run auction. Firms that are taking advantage of this opportunity are focus- are taking advantage of this opportunity are focus- 8.1 DEVELOP AND EXECUTE ing on higher quality clean coffee for the specialty 8.1 DEVELOP AND EXECUTE ing on higher quality clean coffee for the specialty COMPETITIVE STRATEGIES markets in the US and Europe. This is a sound COMPETITIVE STRATEGIES markets in the US and Europe. This is a sound strategy in the coffee market and should be encour- strategy in the coffee market and should be encour- IN KEY CLUSTERS aged. At a primary level this requires investment in IN KEY CLUSTERS aged. At a primary level this requires investment in the construction of processing centers and the train- the construction of processing centers and the train- Tanzania’s biggest challenge to achieving sustained Tanzania’s biggest challenge to achieving sustained ing of operators to ensure a consistent high quality ing of operators to ensure a consistent high quality economic growth and competitiveness is the economic growth and competitiveness is the product. ICT solutions will have relatively limited product. ICT solutions will have relatively limited upgrade of its products and services. Given the chal- upgrade of its products and services. Given the chal- impact, but may include a GIS study to strategically impact, but may include a GIS study to strategically lenges to becoming globally competitive in any lenges to becoming globally competitive in any locate processing centers, websites for more sophisti- locate processing centers, websites for more sophisti- industry, Tanzania’s public and private sector leaders industry, Tanzania’s public and private sector leaders cated producers such as KILICAFE, and database cated producers such as KILICAFE, and database must not only create a platform for successful firms, must not only create a platform for successful firms, systems to capture data for appellation models. systems to capture data for appellation models. but also target support of key economic sectors that but also target support of key economic sectors that have the revenue and employment potential to help have the revenue and employment potential to help Experience with processing facilities in the cashew Experience with processing facilities in the cashew the country reach its national objectives. This the country reach its national objectives. This sector highlights the need to adopt appropriate sector highlights the need to adopt appropriate requires developing a coherent and coordinated requires developing a coherent and coordinated technology. Value addition opportunities exist and technology. Value addition opportunities exist and industry-wide strategy for each of those target clus- industry-wide strategy for each of those target clus- are being successfully implemented by firms such as are being successfully implemented by firms such as ters, and building public and private sector partner- ters, and building public and private sector partner- Olam International. The processing method adopt- Olam International. The processing method adopt- ships to attract support and investment. The initial ships to attract support and investment. The initial ed by Olam is different from that used in the state- ed by Olam is different from that used in the state- analysis in this report of the agribusiness, minerals analysis in this report of the agribusiness, minerals built factories that have been privatized. This built factories that have been privatized. This and tourism sectors can be used as a foundation to and tourism sectors can be used as a foundation to process ensures a higher quality product less kernel process ensures a higher quality product less kernel formalize selection of priority sectors and test formalize selection of priority sectors and test breakage, which decreases value) and is labor inten- breakage, which decreases value) and is labor inten- hypotheses about how to upgrade these industries. hypotheses about how to upgrade these industries. sive, providing employment opportunities. Again sive, providing employment opportunities. Again ICT solutions are not indispensable to affect this ICT solutions are not indispensable to affect this Once Tanzania develops competitive strategies in Once Tanzania develops competitive strategies in transition, but they can help to facilitate it. One transition, but they can help to facilitate it. One promising sectors and sub-sectors with detailed promising sectors and sub-sectors with detailed technology that can be used in cashews and agricul- technology that can be used in cashews and agricul- action and investment plans, specific firms and action and investment plans, specific firms and ture generally is the adoption of traceability systems ture generally is the adoption of traceability systems institutions can then benefit from directed invest- institutions can then benefit from directed invest- that provide information to participants along the that provide information to participants along the ment. The primary value of this directed investment. The primary value of this directed invest- supply chain. Demand-driven traceability require- supply chain. Demand-driven traceability require- ment is that it allows the government, donors and ment is that it allows the government, donors and ments include certifying organic products, tracking ments include certifying organic products, tracking the private sector to prioritize high impact invest- the private sector to prioritize high impact invest- insecticide/pesticide use, identifying genetically insecticide/pesticide use, identifying genetically ments within constrained budgets. The inclusion of ments within constrained budgets. The inclusion of modified foods and backtracking sources in case of modified foods and backtracking sources in case of financial institutions and donor organizations in financial institutions and donor organizations in health hazards. health hazards. the strategy and implementation process facilitates the strategy and implementation process facilitates the access to capital required by private sector the access to capital required by private sector Within the minerals and mining sector there are Within the minerals and mining sector there are entrepreneurs and cooperatives to execute the strat- entrepreneurs and cooperatives to execute the strat- forward integration opportunities in the lapidary forward integration opportunities in the lapidary egy. Local financial institutions feel more comfort- egy. Local financial institutions feel more comfort- and jewelry industries. A victim of smuggling and and jewelry industries. A victim of smuggling and able lending to investors who are following strate- able lending to investors who are following strate- adverse regulation in the past, this industry will adverse regulation in the past, this industry will gies that have been tested with the market, and gies that have been tested with the market, and have a new opportunity to thrive in January, 2006, have a new opportunity to thrive in January, 2006, have been explicitly endorsed by private and public have been explicitly endorsed by private and public when legislation prohibiting the export of uncut when legislation prohibiting the export of uncut sector participants. Donor organizations are assured sector participants. Donor organizations are assured gemstones goes into effect. Donors and govern- gemstones goes into effect. Donors and govern- that projects designed for the priority sectors will that projects designed for the priority sectors will ment can prepare the domestic private sector to ment can prepare the domestic private sector to not be executed in a vacuum, but will be adding not be executed in a vacuum, but will be adding capture forward integration value. Activities include capture forward integration value. Activities include value to a comprehensive effort to strengthen the value to a comprehensive effort to strengthen the training domestic artisans, financing the purchase training domestic artisans, financing the purchase economy. economy. of appropriate technology and conducting in-depth of appropriate technology and conducting in-depth primary market research. One ICT solution that primary market research. One ICT solution that The outputs of this process will vary from sector to The outputs of this process will vary from sector to could be valuable is investing in electronic trace- could be valuable is investing in electronic trace- sector, as shown by the analysis in this report of sector, as shown by the analysis in this report of ability systems for tanzanite to efficiently conform ability systems for tanzanite to efficiently conform several key economic sectors: several key economic sectors:

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to the Tucson Tanzanite Protocols. Another is pur- entrepreneurs launching businesses receive suffi- to the Tucson Tanzanite Protocols. Another is pur- entrepreneurs launching businesses receive suffi- chasing and training the jewelry industry in CAD cient support. chasing and training the jewelry industry in CAD cient support. CAM methods of jewelry design. CAM methods of jewelry design.

The tourism industry is a complex and important The tourism industry is a complex and important business in Tanzania, and one in which industry business in Tanzania, and one in which industry dynamics lead foreign tour agents to capture much 8.2 FACILITATE ACCESS dynamics lead foreign tour agents to capture much 8.2 FACILITATE ACCESS of the total value. Most tour operators in Tanzania of the total value. Most tour operators in Tanzania focus on developing relationships with tour agents Access to ICT is a critical part of a building a focus on developing relationships with tour agents Access to ICT is a critical part of a building a in foreign countries, who direct clients to the coun- strong competitive platform for all firms, whether in foreign countries, who direct clients to the coun- strong competitive platform for all firms, whether try and maintain strong bargaining positions they compete domestically or internationally. try and maintain strong bargaining positions they compete domestically or internationally. against the domestic operators. As such, prices and Increased access can lead to better coordination and against the domestic operators. As such, prices and Increased access can lead to better coordination and margins are not controlled by local players. communication across the value chain, increasing margins are not controlled by local players. communication across the value chain, increasing Domestic operators do not focus on targeting spe- productivity and efficiency. For all firms, but par- Domestic operators do not focus on targeting spe- productivity and efficiency. For all firms, but par- cific customer segments that can drive a more ticularly those competing in international markets, cific customer segments that can drive a more ticularly those competing in international markets, informed and competitive strategy in an industry increased access to ICT can also lower cost struc- informed and competitive strategy in an industry increased access to ICT can also lower cost struc- that is approaching saturation in terms of the num- tures. Although this benefit may not translate into that is approaching saturation in terms of the num- tures. Although this benefit may not translate into ber of players. Capturing valuable customer knowl- increased competitive advantage against firms from ber of players. Capturing valuable customer knowl- increased competitive advantage against firms from edge and increased communication with consumers other countries, it levels the playing field for edge and increased communication with consumers other countries, it levels the playing field for will allow operators to customize experiences for Tanzanian companies. will allow operators to customize experiences for Tanzanian companies. high value clients. Market research tools such as high value clients. Market research tools such as online surveys and analytical packages are an Access to ICT in Tanzania is currently weak. Fixed online surveys and analytical packages are an Access to ICT in Tanzania is currently weak. Fixed opportunity to leverage ICT to react to and satisfy and mobile teledensities are some of the lowest in opportunity to leverage ICT to react to and satisfy and mobile teledensities are some of the lowest in customer preferences. Africa, even as the increasing use of mobiles phones customer preferences. Africa, even as the increasing use of mobiles phones compensates slightly for the slow growth in fixed- compensates slightly for the slow growth in fixed- Finally, new sectors will become attractive in the line telephony. In terms of Internet hosts and com- Finally, new sectors will become attractive in the line telephony. In terms of Internet hosts and com- near future, sectors in which Tanzania is not cur- puters, Tanzania has one of the lowest usage rates in near future, sectors in which Tanzania is not cur- puters, Tanzania has one of the lowest usage rates in rently competing. When these opportunities the region. Internet density is particularly low at rently competing. When these opportunities the region. Internet density is particularly low at develop, it will be important to ensure that 0.23 users per 100 inhabitants.79 The broadening of develop, it will be important to ensure that 0.23 users per 100 inhabitants.79 The broadening of

Action items Action items

■ Form a small committee to identify priority sectors and create public / private sector workgroups for each priority sector tasked with ■ Form a small committee to identify priority sectors and create public / private sector workgroups for each priority sector tasked with developing detailed action and investment plans, as well as concrete timelines for final sector strategies informed by international developing detailed action and investment plans, as well as concrete timelines for final sector strategies informed by international markets. markets.

■ Private- Public task forces should develop a system through which priority sector performance, investment and returns will be tracked ■ Private- Public task forces should develop a system through which priority sector performance, investment and returns will be tracked against projections; this data will enhance transparency and be useful in refining resource allocation and strategy goals. against projections; this data will enhance transparency and be useful in refining resource allocation and strategy goals.

■ In the coffee sector, government and institutions should encourage investment in a high quality strategy, including processing infrastruc- ■ In the coffee sector, government and institutions should encourage investment in a high quality strategy, including processing infrastructure and operator training. In cashews, invest in appropriate technology for factories to process cashews for export. Research opportu- ture and operator training. In cashews, invest in appropriate technology for factories to process cashews for export. Research opportunities to invest in traceability systems that provide value to consumers and differentiation from competitors. nities to invest in traceability systems that provide value to consumers and differentiation from competitors.

■ Within the minerals sector, prepare the domestic private sector to capture forward integration value in lapidary and jewelry industries, ■ Within the minerals sector, prepare the domestic private sector to capture forward integration value in lapidary and jewelry industries, including training domestic artisans, financing the purchase of appropriate technology (CAD CAM), and conducting in-depth primary including training domestic artisans, financing the purchase of appropriate technology (CAD CAM), and conducting in-depth primary market research. Invest in electronic traceability systems for tanzanite to efficiently conform to the Tucson Tanzanite Protocols. market research. Invest in electronic traceability systems for tanzanite to efficiently conform to the Tucson Tanzanite Protocols.

■ Build a more competitive tourism strategy through the framework discussed above. Invest in market research and analysis tools to ■ Build a more competitive tourism strategy through the framework discussed above. Invest in market research and analysis tools to increase customer knowledge and communications. increase customer knowledge and communications.

79 ITU 2003 79 ITU 2003

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access to ICT can be accomplished by improving needs. The body will need to coordinate closely with access to ICT can be accomplished by improving needs. The body will need to coordinate closely with international connectivity, building out the national TCRA and may need to be appointed by GOT. The international connectivity, building out the national TCRA and may need to be appointed by GOT. The backbone infrastructure and addressing the digital government should also work with key stakeholders backbone infrastructure and addressing the digital government should also work with key stakeholders divide between urban and rural areas. of incumbent networks, TANESCO, TTCL, divide between urban and rural areas. of incumbent networks, TANESCO, TTCL, TAZARA, TRC and SONGAS so that a framework TAZARA, TRC and SONGAS so that a framework The high costs of connectivity are mostly due to the can be adopted in which these owners provide access The high costs of connectivity are mostly due to the can be adopted in which these owners provide access expense of connecting internationally through satel- to their networks to other potential providers, so expense of connecting internationally through satel- to their networks to other potential providers, so lite. Tanzania must invest in alternative methods to that commercial connectivity can increase around lite. Tanzania must invest in alternative methods to that commercial connectivity can increase around access the international fiber optic backbone, which the existing networks. access the international fiber optic backbone, which the existing networks. is a key determinant in making domestic connectiv- is a key determinant in making domestic connectivity affordable and reliable. Expensive and unreliable In both efforts to improve international connectivi- ity affordable and reliable. Expensive and unreliable In both efforts to improve international connectivi- connectivity adversely affects firms’ ability to com- ty and the domestic infrastructure, TCRA will play connectivity adversely affects firms’ ability to com- ty and the domestic infrastructure, TCRA will play pete in domestic, regional and international mar- a significant role. After liberalization, TCRA has pete in domestic, regional and international mar- a significant role. After liberalization, TCRA has kets. In order to address these issues, Tanzania must implemented progressive regulation around licens- kets. In order to address these issues, Tanzania must implemented progressive regulation around licens- not only focus on its infrastructure, but also on its ing, interconnectivity and switching costs for tele- not only focus on its infrastructure, but also on its ing, interconnectivity and switching costs for tele- regulatory and competitive environment. com. However, prices are still high for the region. regulatory and competitive environment. com. However, prices are still high for the region. In general, TCRA needs to implement and enforce In general, TCRA needs to implement and enforce Political support must be mobilized to facilitate fair competition among telecom and data services Political support must be mobilized to facilitate fair competition among telecom and data services regional dialogue for the EASSY project via Eastern providers so that new players can enter the market regional dialogue for the EASSY project via Eastern providers so that new players can enter the market African Community representatives and Zanzibar and effectively lower prices (seeking to duplicate African Community representatives and Zanzibar and effectively lower prices (seeking to duplicate Telecom, Tanzania’s representative to the MOU. the effect Zantel has had in lowering prices and Telecom, Tanzania’s representative to the MOU. the effect Zantel has had in lowering prices and While the project is expected to be primarily improving service quality in Zanzibar). Regulations While the project is expected to be primarily improving service quality in Zanzibar). Regulations financed by MOU parties as equity holders and should ensure that all networks can talk to each financed by MOU parties as equity holders and should ensure that all networks can talk to each strategic investors in the form of global carriers, other, hand off communications and provide fair- strategic investors in the form of global carriers, other, hand off communications and provide fair- there will also be additional funding required in the priced interconnectivity. there will also be additional funding required in the priced interconnectivity. form of loans or bank guarantees to local private form of loans or bank guarantees to local private companies. This is an opportunity for donors to In preparation for more efficient international con- companies. This is an opportunity for donors to In preparation for more efficient international con- invest directly in improving Tanzanian and East nectivity, TCRA’s regulation needs to ensure that invest directly in improving Tanzanian and East nectivity, TCRA’s regulation needs to ensure that African connectivity. In tandem with EASSY, cost savings are passed on to the private sector when African connectivity. In tandem with EASSY, cost savings are passed on to the private sector when support and regulation will also be required for EASSY and EADTS are operational. In some coun- support and regulation will also be required for EASSY and EADTS are operational. In some coun- the East African Digital Transmission System tries, access to these types of cables has been limited the East African Digital Transmission System tries, access to these types of cables has been limited (EADTS), to link the EASSY fiber optic cable to by regulators, stifling the benefits of competition. In (EADTS), to link the EASSY fiber optic cable to by regulators, stifling the benefits of competition. In the mainland. these monopolistic models, providers have set access the mainland. these monopolistic models, providers have set access rates to cables so close to that of satellite rates that rates to cables so close to that of satellite rates that Access will further increase within the country once the private sector has not benefited from the reduc- Access will further increase within the country once the private sector has not benefited from the reduc- Tanzania implements its national infrastructure tion in costs necessary to compete. Tanzania implements its national infrastructure tion in costs necessary to compete. backbone project. The government can play a key backbone project. The government can play a key role in this endeavor and must leverage existing Access is particularly weak in rural areas, which role in this endeavor and must leverage existing Access is particularly weak in rural areas, which networks while encouraging last-mile build out have significantly less ICT infrastructure, much networks while encouraging last-mile build out have significantly less ICT infrastructure, much services by the private sector. With large expensive lower quality of training in terms of education and services by the private sector. With large expensive lower quality of training in terms of education and infrastructure projects such as this one, Tanzania ability, and fewer opportunities for work. The infrastructure projects such as this one, Tanzania ability, and fewer opportunities for work. The cannot afford the duplication of effort or inefficient rural/urban divide in Tanzania will be exacerbated cannot afford the duplication of effort or inefficient rural/urban divide in Tanzania will be exacerbated investments, which have plagued more developed under current competitive dynamics and condi- investments, which have plagued more developed under current competitive dynamics and condi- economies. The project would require the construc- tions. However, if resources are mobilized to economies. The project would require the construc- tions. However, if resources are mobilized to tion of 6,997 km of fiber optic cables and approxi- improve connectivity, the gap between these popu- tion of 6,997 km of fiber optic cables and approxi- improve connectivity, the gap between these popu- mately 3,475 km of links, at a total estimated cost lations can be decreased. Government and donors mately 3,475 km of links, at a total estimated cost lations can be decreased. Government and donors of more than US$ 169 million. have a role to play in bringing access to rural areas, of more than US$ 169 million. have a role to play in bringing access to rural areas, although this investment must be rationalized. although this investment must be rationalized. An institution needs to be identified that will oversee Social service providers and SMEs in rural areas An institution needs to be identified that will oversee Social service providers and SMEs in rural areas the management of the new backbone operation and that have a demonstrated need for ICT solutions the management of the new backbone operation and that have a demonstrated need for ICT solutions its leasing agreements. This institution will need to should be supported with access to capital. The its leasing agreements. This institution will need to should be supported with access to capital. The operate effectively and be responsive to private sector same is true of ICT sector players that can fulfill a operate effectively and be responsive to private sector same is true of ICT sector players that can fulfill a

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market demand in these areas. When direct subsi- 8.3 IMPROVE ABILITY market demand in these areas. When direct subsi- 8.3 IMPROVE ABILITY dies or grants are used, it should be clear that doing dies or grants are used, it should be clear that doing so will not suppress private sector development in so will not suppress private sector development in While Tanzania advances in making ICT more While Tanzania advances in making ICT more providing the same services. providing the same services. accessible to its population, it must also address the accessible to its population, it must also address the limited ability of many people to use ICT effective- limited ability of many people to use ICT effective- For example, although the Sengerema Telecentre is ly. This is another important factor responsible for For example, although the Sengerema Telecentre is ly. This is another important factor responsible for a current success story, and its rising revenues are a the lack of ICT adoption in Tanzania and is a a current success story, and its rising revenues are a the lack of ICT adoption in Tanzania and is a testament to the market demand for such services, direct function of education levels and technology testament to the market demand for such services, direct function of education levels and technology caution should be taken in replicating this model. training. Long-term success of access initiatives caution should be taken in replicating this model. training. Long-term success of access initiatives The private sector has demonstrated its ability to rests on firms’ capacity to effectively take advantage The private sector has demonstrated its ability to rests on firms’ capacity to effectively take advantage serve similar market demands, as shown by the pro- of an enhanced ICT platform throughout the serve similar market demands, as shown by the pro- of an enhanced ICT platform throughout the liferation of Internet cafes throughout the country country. To this end, Tanzania needs to focus on liferation of Internet cafes throughout the country country. To this end, Tanzania needs to focus on that also provide other basic business solutions. two critical areas: improving basic education and that also provide other basic business solutions. two critical areas: improving basic education and Donors must work to assist the private sector in enhancing training in applied ICT business skills. Donors must work to assist the private sector in enhancing training in applied ICT business skills. providing these services, while not distorting a providing these services, while not distorting a competitive market environment. While recent reforms in primary education have competitive market environment. While recent reforms in primary education have lifted enrollment rates in Tanzania, secondary lifted enrollment rates in Tanzania, secondary When bridging the rural/urban digital divide, school enrollments and tertiary education remain When bridging the rural/urban digital divide, school enrollments and tertiary education remain investment in rural areas must also be appropriate among the lowest in Sub-Saharan Africa at just investment in rural areas must also be appropriate among the lowest in Sub-Saharan Africa at just to the environment. According to the analysis of 5% and 1% respectively.80 As the government to the environment. According to the analysis of 5% and 1% respectively.80 As the government rural ICT usage done by DFID in June, 2005, addresses the low levels of education generally, it rural ICT usage done by DFID in June, 2005, addresses the low levels of education generally, it rural areas are more dependent on radio broad- also needs to incorporate ICT into its education rural areas are more dependent on radio broad- also needs to incorporate ICT into its education casts and mobile phones than personal computers strategy. It is beyond the scope of this report to casts and mobile phones than personal computers strategy. It is beyond the scope of this report to or Internet. Social service providers will find these advise on general education policy, but there are or Internet. Social service providers will find these advise on general education policy, but there are technologies most useful in promoting healthcare tangible actions that can be taken to support the technologies most useful in promoting healthcare tangible actions that can be taken to support the education such as infant immunization in rural inclusion of ICT in basic education curricula. education such as infant immunization in rural inclusion of ICT in basic education curricula. areas. Given the low levels of basic education, Since basic education is a broad social good, this areas. Given the low levels of basic education, Since basic education is a broad social good, this accessing more sophisticated forms of ICT should is an area in which donor institutions can imple- accessing more sophisticated forms of ICT should is an area in which donor institutions can imple- not be dependent on speaking English, and web- ment programs without worrying about distorting not be dependent on speaking English, and web- ment programs without worrying about distorting sites should be developed with Swahili content. markets. sites should be developed with Swahili content. markets.

Action items Action items

■ Ensure that domestic firms wishing to invest in EASSY rollouts have access to financing, and research donor support of telecom financ- ■ Ensure that domestic firms wishing to invest in EASSY rollouts have access to financing, and research donor support of telecom financing in other countries. Possibilities include direct loans or loan guarantee programs with domestic commercial banks. ing in other countries. Possibilities include direct loans or loan guarantee programs with domestic commercial banks.

■ Invest in a detailed feasibility study of the backhaul logistics to landlocked partners of EASSY project such as Rwanda and Uganda that ■ Invest in a detailed feasibility study of the backhaul logistics to landlocked partners of EASSY project such as Rwanda and Uganda that will traverse Tanzania. will traverse Tanzania.

■ Create incentives through TCRA that will encourage commercial last mile build-out using the existing and new fiber optic networks. ■ Create incentives through TCRA that will encourage commercial last mile build-out using the existing and new fiber optic networks.

■ Invite ICT-focused NGOs and experts such as ICANN to diffuse best practices in pro-competition policy and regulatory frameworks to ■ Invite ICT-focused NGOs and experts such as ICANN to diffuse best practices in pro-competition policy and regulatory frameworks to help guide TCRA. help guide TCRA.

■ Support demand-driven ICT investments by SMEs in rural areas, subsidizing rural firms’ investment in ICT hardware and connectivity. ■ Support demand-driven ICT investments by SMEs in rural areas, subsidizing rural firms’ investment in ICT hardware and connectivity. Accelerate the realization of the Rural Telecommunications Fund and the institutional framework by guiding implementation. Accelerate the realization of the Rural Telecommunications Fund and the institutional framework by guiding implementation.

■ Facilitate joint ventures between international ICT-focused companies and local ones. ■ Facilitate joint ventures between international ICT-focused companies and local ones.

■ Subsidize training for ICT sector firms in areas such as English writing skills, training of trainers, customer care service, and technical ■ Subsidize training for ICT sector firms in areas such as English writing skills, training of trainers, customer care service, and technical abilities. abilities.

■ Rationalize and revise taxes and tariffs on technology adoption. Analyze impact on ICT firms of 15% withholding tax on services such ■ Rationalize and revise taxes and tariffs on technology adoption. Analyze impact on ICT firms of 15% withholding tax on services such as bandwidth. as bandwidth.

80 World Development Indicators, World Bank 2004 80 World Development Indicators, World Bank 2004

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Secondary schools represent a good opportunity for needs assessment of the private sector, especially Secondary schools represent a good opportunity for needs assessment of the private sector, especially introducing students to computers and their value. SMEs, to evaluate their specific issues. This study will introducing students to computers and their value. SMEs, to evaluate their specific issues. This study will This can be a more complicated process than it ini- inform the content of specialized ICT training pro- This can be a more complicated process than it ini- inform the content of specialized ICT training pro- tially appears. Integrating ICT into the educational grams, which can be implemented by both academia tially appears. Integrating ICT into the educational grams, which can be implemented by both academia system goes beyond setting up a few computers and and the private sector. system goes beyond setting up a few computers and and the private sector. exposing students to the Internet or basic pro- exposing students to the Internet or basic programs. It even goes further than conducting com- grams. It even goes further than conducting computer training sessions by experienced professionals. Action items puter training sessions by experienced professionals. Action items To introduce students to the benefits of ICT in a To introduce students to the benefits of ICT in a rigorous way, teachers must incorporate ICT into ■ Designate a task force that can develop methods by which rigorous way, teachers must incorporate ICT into ■ Designate a task force that can develop methods by which their own teaching methods. This means that secondary school teachers can incorporate ICT into their cur- their own teaching methods. This means that secondary school teachers can incorporate ICT into their curricula and give teachers incentives to enroll in ICT training. ricula and give teachers incentives to enroll in ICT training. teachers themselves may need ICT training. Invite experts such as SchoolNet Africa to provide counsel. teachers themselves may need ICT training. Invite experts such as SchoolNet Africa to provide counsel.

The types of projects that support ICT training in ■ Invite and sponsor private sector leaders to hold honorary The types of projects that support ICT training in ■ Invite and sponsor private sector leaders to hold honorary professorships to teach courses that highlight the business professorships to teach courses that highlight the business secondary schools should be carefully evaluated. As applications of ICT at the University of Dar es Salaam’s secondary schools should be carefully evaluated. As applications of ICT at the University of Dar es Salaam’s evidenced by the experience of the DILES project, Department of Engineering, as well as at the University evidenced by the experience of the DILES project, Department of Engineering, as well as at the University which made secondary school examinations and Computing Centre, Ltd. which made secondary school examinations and Computing Centre, Ltd. syllabi available on the Internet, not all methods syllabi available on the Internet, not all methods are appropriate. This project depended on passive are appropriate. This project depended on passive methods of attraction and assumed greater access methods of attraction and assumed greater access than was realistic. The Thin Client Terminal than was realistic. The Thin Client Terminal Project currently being implemented in a pilot phase 8.4 STRENGTHEN SMES Project currently being implemented in a pilot phase 8.4 STRENGTHEN SMES may better facilitate access and improve ability at a THROUGH INCUBATION may better facilitate access and improve ability at a THROUGH INCUBATION reduced cost. As mentioned previously, however, AND BDS reduced cost. As mentioned previously, however, AND BDS providing hardware is only a first step in truly providing hardware is only a first step in truly capturing the benefits if computers in schools Given the importance of SMEs in private sector capturing the benefits if computers in schools Given the importance of SMEs in private sector development, both in exports and domestic contri- development, both in exports and domestic contri- Improving ability in the private sector requires a dif- bution, these firms must be supported generally Improving ability in the private sector requires a dif- bution, these firms must be supported generally ferent approach, and should focus on enhancing and in regards to ICT adoption. Providing well ferent approach, and should focus on enhancing and in regards to ICT adoption. Providing well training in applied ICT business skills. The annual thought out business incubators and business training in applied ICT business skills. The annual thought out business incubators and business private rates of return to these types of technical and development services (BDS) to SMEs is one step private rates of return to these types of technical and development services (BDS) to SMEs is one step on the job training are very high compared to basic that can strengthen these enterprises. on the job training are very high compared to basic that can strengthen these enterprises. education, as shown in a 1997 World Bank study. education, as shown in a 1997 World Bank study. The study concludes that while return rates on Business incubators can help start-ups survive in The study concludes that while return rates on Business incubators can help start-ups survive in University training average 9%, the rates for voca- this crucial phase by providing a range of services, University training average 9%, the rates for voca- this crucial phase by providing a range of services, tional training are 19.4%, and 35.2% for on-the-job from hands-on management/technical assistance tional training are 19.4%, and 35.2% for on-the-job from hands-on management/technical assistance training.81 Unfortunately there are not enough strong and access to finance, to support services and infra- training.81 Unfortunately there are not enough strong and access to finance, to support services and infra- links between academic trainings and the private sec- structure, such as office space and communication links between academic trainings and the private sec- structure, such as office space and communication tor’s needs. Though some initiatives have addressed facilities. Research on business incubation has led tor’s needs. Though some initiatives have addressed facilities. Research on business incubation has led the disconnect between academic training and the to a set of general principles to secure the financial the disconnect between academic training and the to a set of general principles to secure the financial needs of private businesses, wider ICT literacy will stability and success rate of this business develop- needs of private businesses, wider ICT literacy will stability and success rate of this business develop- only become a reality when both individuals and ment model. First, the less an incubator relies on only become a reality when both individuals and ment model. First, the less an incubator relies on organizations use them in their day to day lives, and subsidies, the more successful and viable it is.82 organizations use them in their day to day lives, and subsidies, the more successful and viable it is.82 when the appropriate advanced training becomes This calls for a clear strategy of how the incubator when the appropriate advanced training becomes This calls for a clear strategy of how the incubator available to those in or entering the workforce. will reach financial sustainability, by both providing available to those in or entering the workforce. will reach financial sustainability, by both providing services to in-house start-ups, and offering training services to in-house start-ups, and offering training There are several ways in which Tanzania can and consulting services to other private and public There are several ways in which Tanzania can and consulting services to other private and public improve coordination between academia and the pri- sector firms. As incubators move towards financial improve coordination between academia and the pri- sector firms. As incubators move towards financial vate sector, but the first step must be to conduct a viability, it is typical for their budget to move away vate sector, but the first step must be to conduct a viability, it is typical for their budget to move away

81 World Bank 1997 81 World Bank 1997 82 NBAI www.nbai.org 82 NBAI www.nbai.org

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from depending heavily on grants from govern- 8.5 CREATE AN ICT ALLIANCE from depending heavily on grants from govern- 8.5 CREATE AN ICT ALLIANCE ment or multilateral organizations, to relying ment or multilateral organizations, to relying exclusively on own revenue-generating activities exclusively on own revenue-generating activities An ICT Alliance for Tanzania would improve ICT An ICT Alliance for Tanzania would improve ICT (consulting services, training, etc). (consulting services, training, etc). adoption by providing a structure through which adoption by providing a structure through which Second, incubators must be run by entrepreneurs ICT actors can effectively engage target user seg- Second, incubators must be run by entrepreneurs ICT actors can effectively engage target user seg- who have the management experience, private sector ments. This ‘task force’ would include ICT actors who have the management experience, private sector ments. This ‘task force’ would include ICT actors connections, energy and charisma to lead other entre- or “suppliers,” which would consist of hardware connections, energy and charisma to lead other entre- or “suppliers,” which would consist of hardware preneurs through the difficult terrain of launching and software suppliers, ICT trainers and govern- preneurs through the difficult terrain of launching and software suppliers, ICT trainers and govern- new ventures. Although connections with the government in its role as regulator, as well as discrete tar- new ventures. Although connections with the government in its role as regulator, as well as discrete tar- ment are an advantage, this cannot be these man- get segments, including SMEs, large enterprises, ment are an advantage, this cannot be these man- get segments, including SMEs, large enterprises, agers’ defining asset.83 Incubators should also draw a local government and national government (a more agers’ defining asset.83 Incubators should also draw a local government and national government (a more clear line between financial intermediation and pro- detailed structure of the ICT Alliance can be found clear line between financial intermediation and pro- detailed structure of the ICT Alliance can be found viding direct financial assistance to firms. The former in Section 5.5.3, “An ICT Alliance”). The suppliers viding direct financial assistance to firms. The former in Section 5.5.3, “An ICT Alliance”). The suppliers is their actual role, and they should focus on setting would work together to provide complete ICT is their actual role, and they should focus on setting would work together to provide complete ICT up networks of potential investors that can help to solutions to firms and government, ensuring that up networks of potential investors that can help to solutions to firms and government, ensuring that raise start-up capital. Finally, the incubator should trainers are available and that government in its raise start-up capital. Finally, the incubator should trainers are available and that government in its have clear and unfailing performance metrics, as well role of regulator is supporting private sector efforts. have clear and unfailing performance metrics, as well role of regulator is supporting private sector efforts. as clear success and “graduation” criteria.84 This structure promotes the relevance of ICT as clear success and “graduation” criteria.84 This structure promotes the relevance of ICT solutions for target segments. This is particularly solutions for target segments. This is particularly Another initiative that can strengthen SMEs and important for the SME sector, which has shown Another initiative that can strengthen SMEs and important for the SME sector, which has shown shore up new business ventures are BDS. As this resistance to adopting ICT solutions that do not shore up new business ventures are BDS. As this resistance to adopting ICT solutions that do not report highlighted, some of the major obstacles offer a clear return on investment cost. report highlighted, some of the major obstacles offer a clear return on investment cost. faced by Tanzanian SMEs are the lack of relevant faced by Tanzanian SMEs are the lack of relevant service offerings and in-house technical capabilities, The ICT Alliance structure that this report endors- service offerings and in-house technical capabilities, The ICT Alliance structure that this report endors- and the difficulty of rural and provincial SMEs in es is ambitious, requiring the coordinated effort of and the difficulty of rural and provincial SMEs in es is ambitious, requiring the coordinated effort of accessing them. For best results, BDS organizations many institutions. Fortunately, Tanzania has a rela- accessing them. For best results, BDS organizations many institutions. Fortunately, Tanzania has a rela- should have (i) a clear mandate and strategic vision, tively strong informal ICT network from which should have (i) a clear mandate and strategic vision, tively strong informal ICT network from which (ii) the in-house technical capabilities to execute on to draw upon for the ICT Alliance. For example, (ii) the in-house technical capabilities to execute on to draw upon for the ICT Alliance. For example, that mandate, (iii) private sector involvement, a two-day workshop sponsored by AITEC and that mandate, (iii) private sector involvement, a two-day workshop sponsored by AITEC and including personnel with entrepreneurial expertise SWOPNET in Mbeya gathered individuals and including personnel with entrepreneurial expertise SWOPNET in Mbeya gathered individuals and that can engender institutional legitimacy, strategic firms from the private sector, government, NGOs that can engender institutional legitimacy, strategic firms from the private sector, government, NGOs guidance, and demand-driven services; and (iv) and local ICT professionals. During the seminar, guidance, and demand-driven services; and (iv) and local ICT professionals. During the seminar, clear performance metrics to assess an agency’s suc- several simple but significant linkages and solutions clear performance metrics to assess an agency’s suc- several simple but significant linkages and solutions cessful interventions with SMEs. Furthermore, the were developed. This type of coordination can be cessful interventions with SMEs. Furthermore, the were developed. This type of coordination can be development of a BDS National Network with spe- facilitated by the ICT Alliance, though with more development of a BDS National Network with spe- facilitated by the ICT Alliance, though with more cific service offerings, can start to close the urban/ structure and depth. cific service offerings, can start to close the urban/ structure and depth. rural divide in terms of SME technical assistance. rural divide in terms of SME technical assistance.

Action items Action items Action items Action items

■ Conduct an SME needs assessment to evaluate ICT usage ■ Conduct an SME needs assessment to evaluate ICT usage and training requirements to guide BDS service offerings, with ■ Identify coordinating body to own the ICT Alliance effort and and training requirements to guide BDS service offerings, with ■ Identify coordinating body to own the ICT Alliance effort and particular focus on the urban/rural divide. begin organizing specific actions. This role could be filled by particular focus on the urban/rural divide. begin organizing specific actions. This role could be filled by the improved ICT Coordination Office in the national govern- the improved ICT Coordination Office in the national govern- ■ Assess the strategic potential of Business Incubation as a tool ment, or by a separate body. ■ Assess the strategic potential of Business Incubation as a tool ment, or by a separate body. to strengthen technology-based companies. Gather knowl- to strengthen technology-based companies. Gather knowledge and best practices from other African Business ■ Provide specialized training programs, forums and workshops edge and best practices from other African Business ■ Provide specialized training programs, forums and workshops Incubation centers (Mauritius National Computer Board’s ICT that tie ICT solutions to the competitive strategy needs of target Incubation centers (Mauritius National Computer Board’s ICT that tie ICT solutions to the competitive strategy needs of target Incubation Center and South Africa’s Voxel Innovation Support groups. Facilitators could include AITEC, Tanzania Incubation Center and South Africa’s Voxel Innovation Support groups. Facilitators could include AITEC, Tanzania Center). Development Gateway and SWOPNET. Center). Development Gateway and SWOPNET.

83 Balancing Act New Update (2004), Issue 186. Pag 2. http://ncb.intnet.mu/ncb/incubator/incubator_downloads/balancing-act_186.pdf 83 Balancing Act New Update (2004), Issue 186. Pag 2. http://ncb.intnet.mu/ncb/incubator/incubator_downloads/balancing-act_186.pdf 84 Based on “Improving Competitiveness and Promoting Economic Diversification in the Caribbean: The Role of ICT”. 84 Based on “Improving Competitiveness and Promoting Economic Diversification in the Caribbean: The Role of ICT”.

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8.6 UPGRADE PUBLIC The National ICT Policy itself is extensive, but 8.6 UPGRADE PUBLIC The National ICT Policy itself is extensive, but what is required now is a more detailed agenda on what is required now is a more detailed agenda on SECTOR AND ENABLING how the ICT platform will enhance the productive SECTOR AND ENABLING how the ICT platform will enhance the productive ENVIRONMENT sectors of the economy, the sectors charged with ENVIRONMENT sectors of the economy, the sectors charged with using ICT to increase productivity and reduce using ICT to increase productivity and reduce Upgrading the public sector and the enabling poverty. Creating ICT offices in relevant Ministries Upgrading the public sector and the enabling poverty. Creating ICT offices in relevant Ministries environment for ICT in Tanzania will take the and institutions is a starting point for tailoring pol- environment for ICT in Tanzania will take the and institutions is a starting point for tailoring pol- coordinated efforts of several institutions within icy for these key sectors. A next step is facilitating coordinated efforts of several institutions within icy for these key sectors. A next step is facilitating and outside of government. ICT coordination conferences for public and private sector players, and outside of government. ICT coordination conferences for public and private sector players, within the government needs to be reinforced to ICT industry members and key players identified within the government needs to be reinforced to ICT industry members and key players identified exploit synergies and make ICT policy more within the priority economic sectors. These forums exploit synergies and make ICT policy more within the priority economic sectors. These forums focused and relevant. This can be accomplished by will foster public-private dialogue regarding ICT focused and relevant. This can be accomplished by will foster public-private dialogue regarding ICT adopting a new coordination structure. The gov- policy and inform government leaders on private adopting a new coordination structure. The gov- policy and inform government leaders on private ernment also needs to continue to invest in appro- sector challenges and needs. A strong competitive ernment also needs to continue to invest in appro- sector challenges and needs. A strong competitive priate e-government solutions. environment for the private sector rests on an priate e-government solutions. environment for the private sector rests on an informed and responsive public sector, and this informed and responsive public sector, and this To empower ICT coordination throughout govern- exercise would be one part of building cross-sector To empower ICT coordination throughout govern- exercise would be one part of building cross-sector ment, the National ICT Coordination Office coordination. ment, the National ICT Coordination Office coordination. should be given additional resources and relocated should be given additional resources and relocated within the President’s or Vice President’s Office, In terms of e-government, the GOT has already within the President’s or Vice President’s Office, In terms of e-government, the GOT has already where the ICT Coordinator would have greater begun to realize the tangible benefits of ICT with where the ICT Coordinator would have greater begun to realize the tangible benefits of ICT with ability to impact cross-ministerial effort. To truly the upgrade of its Human Resources systems and the ability to impact cross-ministerial effort. To truly the upgrade of its Human Resources systems and the coordinate ICT policy effectively, a network of ICT launch of the Parliamentary Online Information coordinate ICT policy effectively, a network of ICT launch of the Parliamentary Online Information professionals should be created throughout System to better serve constituents. However, firms professionals should be created throughout System to better serve constituents. However, firms Ministries and public institutions. These individuals still complain of bureaucratic delays, and ICT can be Ministries and public institutions. These individuals still complain of bureaucratic delays, and ICT can be would report to the National ICT Coordination a powerful tool in addressing this issue. By learning would report to the National ICT Coordination a powerful tool in addressing this issue. By learning Office. The institution-level offices would recom- from regional and global best practices, Tanzania’s Office. The institution-level offices would recom- from regional and global best practices, Tanzania’s mend ICT policy inputs and determine appropriate government could continue to transition from paper mend ICT policy inputs and determine appropriate government could continue to transition from paper ICT interventions and investment in priority sector to electronic systems, centralize back office networks, ICT interventions and investment in priority sector to electronic systems, centralize back office networks, strategies through a bottom-up approach. To ensure and simplify procedures related to trade, customs, strategies through a bottom-up approach. To ensure and simplify procedures related to trade, customs, execution, these offices would be expected to and new business registration, among others. The execution, these offices would be expected to and new business registration, among others. The strengthen linkages with private sector firms and act ability to provide these services effectively to citizens strengthen linkages with private sector firms and act ability to provide these services effectively to citizens as members of the ICT Alliance. In tourism, for will increasingly depend on the government’s ability as members of the ICT Alliance. In tourism, for will increasingly depend on the government’s ability example, workshops could be sponsored by the ICT to digitize its own processes. To drive the transition example, workshops could be sponsored by the ICT to digitize its own processes. To drive the transition office within the Ministry of Natural Resources and to a working e-government, investment will be office within the Ministry of Natural Resources and to a working e-government, investment will be Tourism, in which private sector operators could needed in hardware, software and training for Tourism, in which private sector operators could needed in hardware, software and training for discuss their challenges in using ICT effectively. government workers. discuss their challenges in using ICT effectively. government workers.

Action items Action items

■ Restructure and relocate National ICT Coordination Office to a cross-cutting office and create ICT offices with Ministries and public sec- ■ Restructure and relocate National ICT Coordination Office to a cross-cutting office and create ICT offices with Ministries and public sector institutions that report to the National Office. tor institutions that report to the National Office.

■ Facilitate conferences for public and private sector players to inform government policy. ■ Facilitate conferences for public and private sector players to inform government policy.

■ Continuously train government and regulator’s staff so that they can anticipate ICT environmental changes and be proactive rather than ■ Continuously train government and regulator’s staff so that they can anticipate ICT environmental changes and be proactive rather than reactive. reactive.

■ Invest in hardware and software to transition government back office from paper based to electronic systems. ■ Invest in hardware and software to transition government back office from paper based to electronic systems.

■ Accelerate National Identification System for purposes of credit assessment and financial accounting and facilitate development of ■ Accelerate National Identification System for purposes of credit assessment and financial accounting and facilitate development of National Switch through coordination support and/or investment. National Switch through coordination support and/or investment.

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A final undertaking that will enhance the ICT some and expensive, since wire fees must be A final undertaking that will enhance the ICT some and expensive, since wire fees must be environment—and the business environment as a included in the transaction. The adoption of environment—and the business environment as a included in the transaction. The adoption of whole–will be enabling e-commerce throughout credit cards will require the completion of the whole–will be enabling e-commerce throughout credit cards will require the completion of the Tanzania. Specifically, this means providing a National Identification System so that credit can Tanzania. Specifically, this means providing a National Identification System so that credit can financial framework for electronic transactions. be adequately assessed and credit-granting institu- financial framework for electronic transactions. be adequately assessed and credit-granting institu- This is a growing demand among firms that target tions can have recourse in situations of default. This is a growing demand among firms that target tions can have recourse in situations of default. international buyers and use websites to support Another important component is a national international buyers and use websites to support Another important component is a national their enterprises, but do not have access to credit switch system that enables connectivity and net- their enterprises, but do not have access to credit switch system that enables connectivity and net- card payment capability. These websites increase working among banks. card payment capability. These websites increase working among banks. access to buyers globally, but payment is cumber- access to buyers globally, but payment is cumber-

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9 APPENDICES 9 APPENDICES

9.1 ECONOMIC AND TRADE STATISTICS 9.1 ECONOMIC AND TRADE STATISTICS

TABLE 9. Tanzania exports TABLE 9. Tanzania exports

US$ millions 1999 2000 2001 2002 2003 US$ millions 1999 2000 2001 2002 2003 Minerals 73.3 177.4 302.2 383.7 540.2 Minerals 73.3 177.4 302.2 383.7 540.2

Cashew Nuts 100.9 84.4 56.6 46.6 39.4 Cashew Nuts 100.9 84.4 56.6 46.6 39.4

Coffee 76.6 83.7 57.1 35.3 49.9 Coffee 76.6 83.7 57.1 35.3 49.9

Manufactured Goods 30.1 43.1 56.2 65.9 99.9 Manufactured Goods 30.1 43.1 56.2 65.9 99.9

Tobacco 43.3 38.4 35.7 55.5 40.8 Tobacco 43.3 38.4 35.7 55.5 40.8

Cotton 28.5 38 33.7 28.6 46.5 Cotton 28.5 38 33.7 28.6 46.5

Tea 24.6 32.8 29 29.6 24.7 Tea 24.6 32.8 29 29.6 24.7

Source: Bank of Tanzania, Economic Bulletin Source: Bank of Tanzania, Economic Bulletin

TABLE 10. Marketed production of major export commodities (zanzibar) TABLE 10. Marketed production of major export commodities (zanzibar)

Metric tons 1996 1997 1998 1999 2000 2001 2002 Metric tons 1996 1997 1998 1999 2000 2001 2002 Cloves 10,339.00 2,506.00 204 8,027.30 460 2,061.90 5,959.80 Cloves 10,339.00 2,506.00 204 8,027.30 460 2,061.90 5,959.80

Copra 2,223.00 1,207.00 93.6 296.4 972.4 254.6 n/a Copra 2,223.00 1,207.00 93.6 296.4 972.4 254.6 n/a

Chilles 3.5 0.2 0.3 0.2 0 0 0 Chilles 3.5 0.2 0.3 0.2 0 0 0

Clove Stems Oil* 1,624.00 771 19.9 10 242.1 323.5 187.3 Clove Stems Oil* 1,624.00 771 19.9 10 242.1 323.5 187.3

Seaweeds 4,861.00 3,667.00 3,394.00 4,834.00 4,990.70 8,117.00 9,090.70 Seaweeds 4,861.00 3,667.00 3,394.00 4,834.00 4,990.70 8,117.00 9,090.70

* Includes other essential oils, cardamom, eucalyptus, etc * Includes other essential oils, cardamom, eucalyptus, etc Source: Ministry of Planning Zanzibar Source: Ministry of Planning Zanzibar

TABLE 11. Inbound tourism arrivals TABLE 11. Inbound tourism arrivals

Thousands 1999 2000 2001 2002 2003 Thousands 1999 2000 2001 2002 2003 Tanzania 627 501 525 575 576 Tanzania 627 501 525 575 576

Uganda 189 193 205 254 305 Uganda 189 193 205 254 305

Kenya 969 1,037 995 1,001 1,146 Kenya 969 1,037 995 1,001 1,146

Mauritius 600 678 675 709 722 Mauritius 600 678 675 709 722

South Africa 6,026 6,001 5,908 6,550 6,640 South Africa 6,026 6,001 5,908 6,550 6,640

Zambia 404 457 492 565 578 Zambia 404 457 492 565 578

Source: World Tourism Organization Source: World Tourism Organization

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TABLE 12. Average length of stay TABLE 12. Average length of stay

Days 1999 2000 2001 2002 2003 Days 1999 2000 2001 2002 2003 Tanzania 7.7 8 8 10 11 Tanzania 7.7 8 8 10 11

Uganda na na na na na Uganda na na na na na

Kenya 9.4 8.7 8.4 8.5 8.4 Kenya 9.4 8.7 8.4 8.5 8.4

Mauritius 10.4 10.4 10.4 10.5 10.4 Mauritius 10.4 10.4 10.4 10.5 10.4

South Africa na na na na na South Africa na na na na na

Zambia 8 6 9 8 8 Zambia 8 6 9 8 8

Source: World Tourism Organization Source: World Tourism Organization

TABLE 13. In-country tourism expenditure TABLE 13. In-country tourism expenditure

US$ millions 1999 2000 2001 2002 2003 US$ millions 1999 2000 2001 2002 2003 Tanzania 467 381 424 441 na Tanzania 467 381 424 441 na

Uganda 151 165 165 171 189 Uganda 151 165 165 171 189

Kenya 485 500 536 513 631 Kenya 485 500 536 513 631

Mauritius 718 732 821 829 946 Mauritius 718 732 821 829 946

South Africa 3,407 3,339 3,257 3,695 5,232 South Africa 3,407 3,339 3,257 3,695 5,232

Zambia 85 111 117 134 149 Zambia 85 111 117 134 149

Source: World Tourism Organization Source: World Tourism Organization

TABLE 14. Spend per day TABLE 14. Spend per day

US$ 1999 2000 2001 2002 2003 US$ 1999 2000 2001 2002 2003 Tanzania * 96.73 95.06 100.95 76.7 71.65 Tanzania * 96.73 95.06 100.95 76.7 71.65

Uganda na na na na na Uganda na na na na na

Kenya 53.25 55.42 64.13 60.29 65.55 Kenya 53.25 55.42 64.13 60.29 65.55

Mauritius 115.06 103.81 116.95 111.36 125.99 Mauritius 115.06 103.81 116.95 111.36 125.99

South Africa na na na na na South Africa na na na na na

Zambia 26.3 40.48 26.42 29.65 32.22 Zambia 26.3 40.48 26.42 29.65 32.22

* Assumption: Passenger transport 8.0% of travel expenditure in 2003 * Assumption: Passenger transport 8.0% of travel expenditure in 2003 Source: World Tourism Organization Source: World Tourism Organization

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FIGURE 39. TANZANIA TOP 5 EXPORTS BY COUNTRY EXPORT VALUE FIGURE 39. TANZANIA TOP 5 EXPORTS BY COUNTRY EXPORT VALUE

Concentration of Exports by Country Export Value

53.3% 54.9%

50% 46.5% Top 5 Exports by Country Export Value, 2003

• Nonmon Gld Unwrt, Semimfd • Fish Fillets, Fresh, Chlld • Precious Metal Ores, Conc

Percent 25% • Coffee Green, Husks, Skins • Fish Fillets, Frozen

0% 1998 2001 2003

FIGURE 40. TANZANIA TOP 5 EXPORTS BY COUNTRY AND WORLD SHARE, 2003 FIGURE 40. TANZANIA TOP 5 EXPORTS BY COUNTRY AND WORLD SHARE, 2003

Concentration of Exports by Concentration of Exports by World Country Export Value, 2003 Market Share, 2003 91.8% 81.1%

81.7% 75% 70.2% 75% 69.4%

54.9% 50% 50% Percent Percent

25% 25% 16.8% 10.3%

0% 0% Top 5 Top 10 Top 20 Top 50 Top 5 Top 10 Top 20 Top 50

Appendices . 93 Appendices . 93 39% 41% 35% 37% 20% 36% 40% 29% WB tanzania text 2-27.qxd 2/27/07 11:52 AM Page 94 WB tanzania text 2-27.qxd 2/27/07 11:52 AM Page 94 23% 0% 0% 2% 0% 2% 2% 2% 1% 5% 2% 1% 3% 1% Industrial and Final Consumption Goods and Services Upstream Industries Supporting Functions 1% 4% 3% 3% Leisure Defense 4% 2% Entertainment/ 8% 3% 1% 18% Personal Computers 13% Semiconductors/ Telecommunications 3% 7% 6% 5% 1% Care Office Health 6% Chemicals 4% Petroleum/ 1% 1% 4% 24% Forest Products and Distribution 4% Textiles/Apparel Power Generation 19% 9% 4% 23% 8% Transportation 7% Materials/Metals Housing/Household 6% 22% 4% 20% 1998 2001 2003 5% 24% Food/Beverages Multiple Business FIGURE 41. DISTRIBUTION OF TANZANIAN IMPORTS FIGURE 41. DISTRIBUTION OF TANZANIAN IMPORTS FIGURE 41. DISTRIBUTION OF TANZANIAN

94 . Improving Competitiveness and Increasing Economic Growth in Tanzania 94 . Improving Competitiveness and Increasing Economic Growth in Tanzania 81.49 − 131.42 −

WB tanzania text 2-27.qxd 2/27/07 11:52 AM Page 95 WB tanzania text 2-27.qxd 2/27/07 11:52 AM Page 95 142.78 − 231.84 − 328.08 − 33.51 − 23.77 − 18.63 − 50.44 61.63 − 77.49 53.84 − 31.59 − 61.66 43.17 − 24.24 Industrial and − Final Consumption Goods and Services Upstream Industries Upstream 4.77 Supporting Functions − 23.07 − 6.78 68.27 48.77 − − − Leisure Leisure Defense 5.69 60.27 31.53 Entertainment/ − − − 137.81 − 56.47 − 310.37 − Personal Computers 211.93 Semiconductors/ − Telecommunications 32.85 44.70 − − 36.63 85.55 − − 18.71 − Care Office Health Chemicals Petroleum/ 36.31 66.27 − − 17.04 − 15.10 − 48.46 413.46 − − Forest Products Textiles/Apparel and Distribution Power Generation Power 46.97 320.33 − 24.32 − − 354.43 49.19 − − 77.99 Transportation Materials/Metals − Housing/Household 107.68 39.97 − 17.62 68.32 − − 1998 2001 2003 43.84 Food/Beverages 75.99 Multiple Business − − FIGURE 42. TANZANIA’S TRADE BALANCE FIGURE 42. TANZANIA’S TRADE BALANCE FIGURE 42. TANZANIA’S

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FIGURE 43 TANZANIA’S CURRENT STAGE AND FIGURE 43 TANZANIA’S CURRENT STAGE AND BROAD CLUSTER STATE BROAD CLUSTER STATE

Primary Goods 38.39% 34.82% 1.18%

Machinery 0.05% 0.05% 0.09% Vertical Stage

5.64% 0.46% 19.32% Specialty Inputs

Upstream Industries Industrial and Final Consumption Supporting Functions Broad Cluster

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Continued Continued Export Value Export Share Export Share Export Value Export Share Export Share Name Broad Cluster Detailed Cluster 2003 Country 2003 Country 2003 World Name Broad Cluster Detailed Cluster 2003 Country 2003 Country 2003 World

Top 50 Tanzanian Industries (1–50) by Export Value, 2003 Industries (1–50) by Export Value, Tanzanian 50 Top 2003 Industries (1–50) by Export Value, Tanzanian 50 Top Fish Fillets, Fresh, ChlldCoffee Green, Husks, SkinsFish Fillets, FrozenCashew Nuts, Fresh, DriedRaw Cotton, Excl Linters Stripped Or PartTobacco Other Wheat Etc UnmilledDiamonds Nonindust , Unset —Cut Etc Not Set DryLeguminous Vegetbles Prec -, Semi -Pr Stones NES Food / Beverages Food / Beverages Personal Food / BeveragesShell Fish Fresh, Frozen Fish Coffee,Tea,Cocoa / Apparel Textiles Food / Beverages PersonalSesame Seeds Food / Beverages Nuts Not StrippedTobacco, Refined Sugar Etc Roasted Cocoa Beans, Raw, Fish CottonGlass Bottles Etc Nonvac Food / Beverages Precious,Semi -P Stones Personal Unmilled Cereals TobaccoFlour Of Wheat Or Meslin 49,135,848 Sisal, Agave Fibres , Waste Vegetables Food / Beverages 24,325,708Live Plants NES 67,171,272Groundnuts, Green 32,543,736 Food / Beverages Precious,Semi -P Stones Fish Personal 43,536,680 4.09%Knitted Etc Articles NES Food / Beverages Food / Beverages 40,793,480 Food / Beverages NESFresh Vegetables 44,126,128 Coffee,Tea,Cocoa 2.02% Food / Beverages / Apparel Textiles 33,458,180 5.59% 18,579,978 Plastic Footwear Rubber, 23,688,808 Food Packaging 2.71%Under Garments Knitted — Of Cotton Non Elastic O Seeds, Beans Tobacco 0.97% Processed Sugar, / Apparel Textiles 3.62%Bovine, Equine Hides, Raw Rice, Cereals 3.39% Other Fibres,Tow,Waste 3.67% 0.07% 7,972,236 3.36% Food / Beverages 2.78% Housing / Household Othr Undr Garmnts 1.55% 1.97% 0.23% 17,532,588 / Apparel Textiles 5.80% 7,953,141 8,429,140 6,677,782 Food / Beverages 0.64% Nuts Plants,Flowers 9,328,344 0.85% / Apparel Textiles / Apparel 7,050,881 Textiles Misc Textiles 0.66% 0.92% 8,646,238 1.04% Vegetables 0.93% 3,857,098 1.46% Footwear 0.66% 0.70% 0.56% Hides,Skins,Raw 0.78% 0.27% 6,038,779 0.59% 0.72% 0.32% 0.11% 5,440,865 12.79% 0.20% 0.15% 5,943,786 2.23% 5,399,574 3,771,292 0.40% 0.50% 0.56% 5,124,146 0.02% 0.45% 0.49% 0.45% 0.12% 0.31% 0.43% 0.42% 0.71% Fish Fillets, Fresh, Chlld 0.05% 0.13% Coffee Green, Husks, SkinsFish Fillets, Frozen 0.05% Cashew Nuts, Fresh, DriedRaw Cotton, Excl Linters Stripped Or PartTobacco Other Wheat Etc UnmilledDiamonds Nonindust , Unset —Cut Etc Not Set DryLeguminous Vegetbles Prec -, Semi -Pr Stones NES Food / Beverages Food / Beverages Personal Food / BeveragesShell Fish Fresh, Frozen Fish Coffee,Tea,Cocoa / Apparel Textiles Food / Beverages PersonalSesame Seeds Food / Beverages Nuts Not StrippedTobacco, Refined Sugar Etc Roasted Cocoa Beans, Raw, Fish CottonGlass Bottles Etc Nonvac Food / Beverages Precious,Semi -P Stones Personal Unmilled Cereals TobaccoFlour Of Wheat Or Meslin 49,135,848 Sisal, Agave Fibres , Waste Vegetables Food / Beverages 24,325,708Live Plants NES 67,171,272Groundnuts, Green 32,543,736 Food / Beverages Precious,Semi -P Stones Fish Personal 43,536,680 4.09%Knitted Etc Articles NES Food / Beverages Food / Beverages 40,793,480 Food / Beverages NESFresh Vegetables 44,126,128 Coffee,Tea,Cocoa 2.02% Food / Beverages / Apparel Textiles 33,458,180 5.59% 18,579,978 Plastic Footwear Rubber, 23,688,808 Food Packaging 2.71%Under Garments Knitted — Of Cotton Non Elastic O Seeds, Beans Tobacco 0.97% Processed Sugar, / Apparel Textiles 3.62%Bovine, Equine Hides, Raw Rice, Cereals 3.39% Other Fibres,Tow,Waste 3.67% 0.07% 7,972,236 3.36% Food / Beverages 2.78% Housing / Household Othr Undr Garmnts 1.55% 1.97% 0.23% 17,532,588 / Apparel Textiles 5.80% 7,953,141 8,429,140 6,677,782 Food / Beverages 0.64% Nuts Plants,Flowers 9,328,344 0.85% / Apparel Textiles / Apparel 7,050,881 Textiles Misc Textiles 0.66% 0.92% 8,646,238 1.04% Vegetables 0.93% 3,857,098 1.46% Footwear 0.66% 0.70% 0.56% Hides,Skins,Raw 0.78% 0.27% 6,038,779 0.59% 0.72% 0.32% 0.11% 5,440,865 12.79% 0.20% 0.15% 5,943,786 2.23% 5,399,574 3,771,292 0.40% 0.50% 0.56% 5,124,146 0.02% 0.45% 0.49% 0.45% 0.12% 0.31% 0.43% 0.42% 0.71% 0.05% 0.13% 0.05% Cigarettes Personal Tobacco, Combustibles 5,717,101 0.48% 0.05% 0.48% 15 TABLE 5,717,101 Nonmon Gld Unwrt , Semimfd Precious Metal Ores, ConcCombustibles Tea Materials / Metals Materials / Metals GoldMaize UnmilledCloves Base Metal Concentrts,Ores 60,992,308 Tobacco, Cut Flowers 438,078,528Soaps 5.07% Food / Beverages Food / BeveragesCigarettes Personal 36.43% Coffee,Tea,Cocoa Unmilled Cereals 5.57% Food / BeveragesCotton, Carded Or Combed 1.63% Spices Housing / Household 24,755,712 18,509,628 Plants,Flowers 0.05% Housing / Household / Apparel Textiles 2.06% 1.54% Cleaning Agents,Waxes Cotton 10,140,651 7,389,387 0.88% 6,151,250 0.17% 0.48% 0.84% 0.61% 0.51% 5,166,850 9.46% 0.15% 15 TABLE 5,717,101 0.17% 0.43% Nonmon Gld Unwrt , Semimfd Precious Metal Ores, Conc 2.29% Combustibles Tea Materials / Metals Materials / Metals GoldMaize UnmilledCloves Base Metal Concentrts,Ores 60,992,308 Tobacco, Cut Flowers 438,078,528Soaps 5.07% Food / Beverages Food / BeveragesCigarettes Personal 36.43% Coffee,Tea,Cocoa Unmilled Cereals 5.57% Food / BeveragesCotton, Carded Or Combed 1.63% Spices Housing / Household 24,755,712 18,509,628 Plants,Flowers Housing / Household / Apparel Textiles 2.06% 1.54% Cleaning Agents,Waxes Cotton 10,140,651 7,389,387 0.88% 6,151,250 0.17% 0.84% 0.61% 0.51% 5,166,850 9.46% 0.15% 0.17% 0.43% 2.29%

Appendices . 97 Appendices . 97 WB tanzania text 2-27.qxd 2/27/07 11:52 AM Page 98 WB tanzania text 2-27.qxd 2/27/07 11:52 AM Page 98 1,103,475,219 91.77% 1,103,475,219 91.77%

Top 50 Tanzanian Industries (1–50) by Export Value, 2003 (Continued) Industries (1–50) by Export Value, Tanzanian 50 Top 2003 (Continued) Industries (1–50) by Export Value, Tanzanian 50 Top Industrial Diamonds Parts, Acces NES Of 785 Fish Frozen, Excl Fillets Oilcake And Oth Residues —Of Cotton Seeds Other Knit Etc Fab Nonel Oth Irn , Stl Plates, Sheet — Of Iron Or Simple Food / Beverages Irn , Stl Thin Plate, Rolld — Of Iron Or Simple Materials / Metals Transportation Oilcake Palm Oil Materials / Metals Materials / Metals Wste , Old Clthg Bulk Text Food / Beverages Fish Frsh , Chlld Ex Fillt Material NES Oth Crd Veg Plate Sheet, Flat Rolled Prodcts Synthetc Tanning Pyrite,Natural Abras Fish Slphr,Irn Plate Sheet, Flat Rolled Parts Transportation / Apparel Textiles 3,675,488 2,231,517 Knitted Fabrics 2,197,399 / Apparel 2,484,068 Textiles 3,074,223 Food / Beverages Food / Beverages / Apparel Textiles 0.31% 0.19% Other Fibres,Tow,Waste Food / Beverages Fish 0.18% 3,054,730 Crude Vgtble Matrls 0.21% 0.26% 2,274,766 Non Synthetic Dyes Other Oils 0.70% 2,018,859 0.01% 0.02% 5.68% 1,959,194 0.25% 0.04% 0.19% 1,945,132 0.17% 2,000,731 0.03% 2,018,882 0.16% 0.02% 0.16% 0.15% 0.17% 0.33% 0.17% 0.34% 0.03% 0.02% Industrial Diamonds Parts, Acces NES Of 785 Fish Frozen, Excl Fillets Oilcake And Oth Residues —Of Cotton Seeds Other Knit Etc Fab Nonel Oth Irn , Stl Plates, Sheet — Of Iron Or Simple Food / Beverages Irn , Stl Thin Plate, Rolld — Of Iron Or Simple Materials / Metals Transportation Oilcake Palm Oil Materials / Metals Materials / Metals Wste , Old Clthg Bulk Text Food / Beverages Fish Frsh , Chlld Ex Fillt Material NES Oth Crd Veg Plate Sheet, Flat Rolled Prodcts Synthetc Tanning Pyrite,Natural Abras Fish Slphr,Irn Plate Sheet, Flat Rolled Parts Transportation / Apparel Textiles 3,675,488 2,231,517 Knitted Fabrics 2,197,399 / Apparel 2,484,068 Textiles 3,074,223 Food / Beverages Food / Beverages / Apparel Textiles 0.31% 0.19% Other Fibres,Tow,Waste Food / Beverages Fish 0.18% 3,054,730 Crude Vgtble Matrls 0.21% 0.26% 2,274,766 Non Synthetic Dyes Other Oils 0.70% 2,018,859 0.01% 0.02% 5.68% 1,959,194 0.25% 0.04% 0.19% 1,945,132 0.17% 2,000,731 0.03% 2,018,882 0.16% 0.02% 0.16% 0.15% 0.17% 0.33% 0.17% 0.34% 0.03% 0.02% Source : OTF Group; COMTRADE / UN Trade Statistics SITC (Rev. 3) @ 3 -digit accuracy Statistics SITC (Rev. Source : OTF Group; COMTRADE / UN Trade 3) @ 3 -digit accuracy Statistics SITC (Rev. Source : OTF Group; COMTRADE / UN Trade Cordage, Cable, Rope, Twine Cordage, Cable, Rope, Twine Common Salt, Etc Cotton Yarn / Apparel Textiles Rope,Cordage (1 -50) SUBTOTAL Materials / Metals Other Crude Minerals 2,824,753 / Apparel Textiles 2,395,406 Yarn,Other 0.23% 0.20% 0.28% 2,141,181 0.21% 0.18% 0.02% Cordage, Cable, Rope, Twine Common Salt, Etc Cotton Yarn / Apparel Textiles Rope,Cordage (1 -50) SUBTOTAL Materials / Metals Other Crude Minerals 2,824,753 / Apparel Textiles 2,395,406 Yarn,Other 0.23% 0.20% 0.28% 2,141,181 0.21% 0.18% 0.02% TABLE 15 TABLE Refuse Tobacco Personal Combustibles Tobacco, 3,751,767 0.31% 2.41% 15 TABLE Refuse Tobacco Personal Combustibles Tobacco, 3,751,767 0.31% 2.41%

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9.2 ICT ASSESSMENT- 2003 ITU INDICATORS 9.2 ICT ASSESSMENT- 2003 ITU INDICATORS TABLE 16. Main telephone lines TABLE 16. Main telephone lines

Per 100 Per 100 Total (000s) CAGR (%) Inhabitants CAGR (%) Total (000s) CAGR (%) Inhabitants CAGR (%) Country 2002 1997–2002 2002 1997–2002 Country 2002 1997–2002 2002 1997–2002 Uganda 55 0.3 0.22 3.2 Uganda 55 0.3 0.22 3.2

Kenya 328.1 3.8 1.03 0.5 Kenya 328.1 3.8 1.03 0.5

Mauritius 327.2 8 27.03 6.7 Mauritius 327.2 8 27.03 6.7

South Africa 4844 0.8 10.66 1.1 South Africa 4844 0.8 10.66 1.1

Tanzania 161.6 9 0.47 6 Tanzania 161.6 9 0.47 6

Zambia 87.7 2.5 0.82 0 Zambia 87.7 2.5 0.82 0

Lower Income 68329.5 14.7 2.83 12.5 Lower Income 68329.5 14.7 2.83 12.5

Lower Middle Income 394271.5 15.3 16.48 14.4 Lower Middle Income 394271.5 15.3 16.48 14.4

Upper Middle Income 66305.9 5.6 20.05 4.4 Upper Middle Income 66305.9 5.6 20.05 4.4

High Income 562668.9 1.9 58.54 1.2 High Income 562668.9 1.9 58.54 1.2

Americas 293448.8 3.8 34.73 2.3 Americas 293448.8 3.8 34.73 2.3

WORLD 1091575.7 6.7 17.9 5.3 WORLD 1091575.7 6.7 17.9 5.3

Source: ITU 2003 Source: ITU 2003

TABLE 17. Local telephone network 2002 TABLE 17. Local telephone network 2002

Main Telephone Lines Faults Per 100 Main Telephone Lines Faults Per 100 Capacity Residential Main Lines Per Capacity Residential Main Lines Per Country Used (%) Automatic (%) (%) Year Country Used (%) Automatic (%) (%) Year Uganda — — 80 — Uganda — — 80 —

Kenya 66.7 99 43.6 220.9 Kenya 66.7 99 43.6 220.9

Mauritius 85.9 100 80 56.8 Mauritius 85.9 100 80 56.8

South Africa — — 51 48.2 South Africa — — 51 48.2

Tanzania 68.9 97 63 24 Tanzania 68.9 97 63 24

Zambia 60.9 100 67 — Zambia 60.9 100 67 —

Lower Income 78.7 99.7 77.9 105.1 Lower Income 78.7 99.7 77.9 105.1

Lower Middle Income 78.8 99.8 79.7 20.8 Lower Middle Income 78.8 99.8 79.7 20.8

Upper Middle Income 80 85.2 76 15.1 Upper Middle Income 80 85.2 76 15.1

High Income 83.6 100 70.7 10.5 High Income 83.6 100 70.7 10.5

Americas 81.4 100 69.2 11.7 Americas 81.4 100 69.2 11.7

WORLD 79.4 99 74.7 23.3 WORLD 79.4 99 74.7 23.3

Source: ITU 2003 Source: ITU 2003

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TABLE 18. Teleaccessibility 2002 TABLE 18. Teleaccessibility 2002

Residential Mainlines Public Telephones Residential Mainlines Public Telephones Per 100 % Households with Per 1000 as % of Per 100 % Households with Per 1000 as % of Country Total (000s) Households a Telephone Total (000s) Inhabitants Mainlines Country Total (000s) Households a Telephone Total (000s) Inhabitants Mainlines Uganda 21.6 0.4 2.7 3.24 0.13 5.9 Uganda 21.6 0.4 2.7 3.24 0.13 5.9

Kenya 142.3 2.1 — 9.6 0.3 2.9 Kenya 142.3 2.1 — 9.6 0.3 2.9

Mauritius 261.8 84.4 80 2.92 2.41 0.09 Mauritius 261.8 84.4 80 2.92 2.41 0.09

South Africa 2511.5 25.1 31 179 3.94 3.7 South Africa 2511.5 25.1 31 179 3.94 3.7

Tanzania 101.8 1.5 2 2 0.06 1.2 Tanzania 101.8 1.5 2 2 0.06 1.2

Zambia 44.8 2.2 3.8 0.88 0.08 1 Zambia 44.8 2.2 3.8 0.88 0.08 1

Lower Income 15954.4 8.2 8.2 2622.63 1.13 3.9 Lower Income 15954.4 8.2 8.2 2622.63 1.13 3.9

Lower Middle Income 310811.5 49.8 49.4 12689.83 5.31 3.2 Lower Middle Income 310811.5 49.8 49.4 12689.83 5.31 3.2

Upper Middle Income 50273.7 58.4 59 1586.89 4.9 2.5 Upper Middle Income 50273.7 58.4 59 1586.89 4.9 2.5

High Income 356235.5 120.5 96.1 4119.85 4.36 0.07 High Income 356235.5 120.5 96.1 4119.85 4.36 0.07

Americas 204646.6 84.5 70.8 4353.44 5.25 1.5 Americas 204646.6 84.5 70.8 4353.44 5.25 1.5

WORLD 733275.1 61 49.8 21009.19 3.52 1.9 WORLD 733275.1 61 49.8 21009.19 3.52 1.9

Source: ITU 2003 Source: ITU 2003

TABLE 19. Telephone tariffs 2002 TABLE 19. Telephone tariffs 2002

Residential Business Subscription as Residential Business Subscription as Connection Subscription Connection Subscriptions Local Calls % GDP Per Connection Subscription Connection Subscriptions Local Calls % GDP Per Country (US$) (US$) (US$) (US$) (US$) Capita* Country (US$) (US$) (US$) (US$) (US$) Capita* Uganda 61 5.6 61 5.6 0.21 27.4 Uganda 61 5.6 61 5.6 0.21 27.4

Kenya 29 5.6 29 5.6 0.07 17.4 Kenya 29 5.6 29 5.6 0.07 17.4

Mauritius 33 2.5 67 7 0.04 0.8 Mauritius 33 2.5 67 7 0.04 0.8

South Africa 23 6.4 23 8.5 0.09 3.4 South Africa 23 6.4 23 8.5 0.09 3.4

Tanzania 41 3.6 41 3.6 0.12 16 Tanzania 41 3.6 41 3.6 0.12 16

Zambia 11 1.1 34 2.3 0.09 4.4 Zambia 11 1.1 34 2.3 0.09 4.4

Lower Income 54 3.1 66 4.2 0.08 11.8 Lower Income 54 3.1 66 4.2 0.08 11.8

Lower Middle Income 84 4.4 121 7.4 0.05 3.7 Lower Middle Income 84 4.4 121 7.4 0.05 3.7

Upper Middle Income 62 7.5 82 12.2 0.09 1.9 Upper Middle Income 62 7.5 82 12.2 0.09 1.9

High Income 83 11.8 94 16.7 0.1 0.7 High Income 83 11.8 94 16.7 0.1 0.7

Americas 88 7.6 115 15.7 0.07 3.1 Americas 88 7.6 115 15.7 0.07 3.1

WORLD 71 6.2 91 9.4 0.08 5.2 WORLD 71 6.2 91 9.4 0.08 5.2

Source: ITU 2003 Source: ITU 2003

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TABLE 20. Mobile cellular subscribers 2002 TABLE 20. Mobile cellular subscribers 2002

Cellular Mobile Subscribers As % of Total Cellular Mobile Subscribers As % of Total Per 100 CAGR (%) Prepaid Population Telephone Per 100 CAGR (%) Prepaid Population Telephone Country Total (000s) Inhabitants 1997–2002 Subscribers (%) Coverage (%) Subscribers Country Total (000s) Inhabitants 1997–2002 Subscribers (%) Coverage (%) Subscribers Uganda 393 1.59 139.4 — 55.0 87.7 Uganda 393 1.59 139.4 — 55.0 87.7

Kenya 1325 4.15 187.3 93.2 — 80.2 Kenya 1325 4.15 187.3 93.2 — 80.2

Mauritius 350 28.91 52.4 79.1 99.8 51.7 Mauritius 350 28.91 52.4 79.1 99.8 51.7

South Africa 13814 30.39 49.7 75.4 95.1 74 South Africa 13814 30.39 49.7 75.4 95.1 74

Tanzania 670 1.95 101.4 — — 80.6 Tanzania 670 1.95 101.4 — — 80.6

Zambia 139 1.3 98.2 — 50.5 61.3 Zambia 139 1.3 98.2 — 50.5 61.3

Lower Income 42298 1.75 76.5 79.9 63.6 38.3 Lower Income 42298 1.75 76.5 79.9 63.6 38.3

Lower Middle Income 380000 15.88 67.6 40.7 82.3 49.1 Lower Middle Income 380000 15.88 67.6 40.7 82.3 49.1

Upper Middle Income 102297 30.94 57.4 74.6 93 59.7 Upper Middle Income 102297 30.94 57.4 74.6 93 59.7

High Income 638079 66.39 29.9 44.5 97.7 53.1 High Income 638079 66.39 29.9 44.5 97.7 53.1

Americas 252642 29.9 28.7 33.5 91.8 46.3 Americas 252642 29.9 28.7 33.5 91.8 46.3

WORLD 1162675 19.07 40.2 46.7 84 51.5 WORLD 1162675 19.07 40.2 46.7 84 51.5

Source: ITU 2003 Source: ITU 2003 TABLE 21. Information Technology 2002 TABLE 21. Information Technology 2002

Internet PCs Internet PCs Hosts Per 100 Users Per 100 Users Per 100 Users Per 100 Hosts Per 100 Users Per 100 Users Per 100 Users Per 100 Country Total Hosts Inhabitants Inhabitants Inhabitants Total (000s) Inhabitants Country Total Hosts Inhabitants Inhabitants Inhabitants Total (000s) Inhabitants Uganda 2242 0.01 100 0.40 82 0.33 Uganda 2242 0.01 100 0.40 82 0.33

Kenya 2963 0.01 400 1.25 204 0.64 Kenya 2963 0.01 400 1.25 204 0.64

Mauritius 3462 0.29 120 9.91 141 11.65 Mauritius 3462 0.29 120 9.91 141 11.65

South Africa 198853 0.44 3100 6.82 3300 7.26 South Africa 198853 0.44 3100 6.82 3300 7.26

Tanzania 1731 0.01 80 0.23 144 0.42 Tanzania 1731 0.01 80 0.23 144 0.42

Zambia 1621 0.02 52 0.49 80 0.75 Zambia 1621 0.02 52 0.49 80 0.75

Lower Income 201028 0.01 32112 1.33 16594 0.72 Lower Income 201028 0.01 32112 1.33 16594 0.72

Lower Middle Lower Middle Income 3683093 0.15 116234 4.86 89202 3.8 Income 3683093 0.15 116234 4.86 89202 3.8

Upper Middle Upper Middle Income 3327987 1.01 46678 14.13 33305 10.08 Income 3327987 1.01 46678 14.13 33305 10.08

High Income 150369694 15.64 427999 44.53 448416 46.68 High Income 150369694 15.64 427999 44.53 448416 46.68

Americas 122555360 14.5 217649 25.76 239717 28.95 Americas 122555360 14.5 217649 25.76 239717 28.95

WORLD 157581802 2.59 623023 10.22 587518 9.91 WORLD 157581802 2.59 623023 10.22 587518 9.91

Source: ITU 2003 Source: ITU 2003

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