PRIVATE SECTOR DEVELOPMENT STRATEGY FOR TANZANIA

1. PRIVATE SECTOR DEVELOPMENTSTRATEGY FOR TANZANIA Prepared by ESRF

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

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

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

5. Conceptual framework

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

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

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

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

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

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

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

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

14. Diagnosis- 8 • Weaknesses • §The legacy of socialist attitudes and hostility §Legal and regulatory framework is not sufficiently facilitative • §High levels of poverty, large income inequalities and thinly spread markets • §Narrow tax base; • §Government institutions not fully reoriented towards PSD • § Poor, unreliable and high cost infrastructure services especially power. • §Large low productivity agricultural sector dominated • Widespread micro and small enterprises many of them still operating in the informal economy

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

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

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

18. Drivers and Strategic challenges2 The strategic challenge is to: ·Have in place a conducive macroeconomic, political and social environment for private sector development; ·Put in place a supportive and facilitative legal and regulatory framework; ·Build public institutions which have the capacity to manage and provide regulatory function to the market to facilitate private sector development;  ·

19. Drivers and Strategic challenges3 Put up a cost effective and reliable infrastructure for private sector development; ·To facilitate easy access to financial services for the private sector; ·Invest in human resource development that is commensurate with the needs of private sector development. Manage land use planning: easy access to land for agriculture and business premises; Facilitate the growth of the market for supportive business development services.

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

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

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

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

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

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

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

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

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

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

30. Thank you for your attention