One of the important components of the decision of which project to take is the business impact of the project. Therefore, understanding the impacts of different projects undertaken by the government on economic development doesn’t need a degree in economics; simple reasoning ability and basic economics can be a good litmus test to give you the big picture of what is happening towards achieving sustainable economic development.
We all know that most African countries, including Tanzania, largely depend on agriculture for economic development. This sector provides employment where more than 80% of rural livelihood is employed in this sector; the sector provides food, export earnings and inputs for local industries.
Moreover, industrial development is equally important as agricultural development, our country needs industries which will add value to our agriculture products, finished products for our people and export to earn foreign currency as well as job creation.
The two sectors are very strategic in our economy; therefore for them to contribute significantly to national development there must be strategic projects to feed the two sectors of the economy. These projects should aim at making available good infrastructures like road, ports, railways, irrigation system, and communication, electricity, and warehouse buildings which are most important for these economic sectors.
Studies indicate that transport cost for finished product contributes about 40% or more of the final consumer price. This means that, if orange is sold at Tsh 200/= at the market then Tsh 80/= or more was used to transport this orange from the farm to the market. In some part of Africa according to the World Bank report of 2017, the transport cost is higher than the commodity price. This also goes to transport cost for individuals within the country and in the East African region which is four times higher than other regions in Africa. Sometimes to fly from one country to another one in African is relatively easy and cheaper to pass through Europe or Asia than within the continent.
This problem is serious to the extent that, you can find some district in Tanzania facing the acute shortage of food while farmers in another district have a huge surplus of food rotting for lack of market and preservative measures.
Therefore, transportation for our agricultural products and finished products from our industries is one of serious challenge within Tanzania and Africa in general. Within Africa, the problem is even more serious to the extent that moving goods from Tanzania to Nigeria is more expensive than moving goods from Tanzania to the UK.
The second challenge is reliable electricity for our processing industries, preservation of agricultural products through refrigeration or using cold rooms to prevent post-harvest which is stated to reach more than 40%. This means if you harvest 200 Tonnes of oranges 80 Tonnes are lost, this is one of the reason most of the small scale farm holders have remained in poverty.
Under President John Magufuli administration, the strategic projects on road construction, power production and transportation and others have been given highest priority in order to boost the economy of most of Tanzanian and the neighbouring countries from the two strategic economic sectors and other sectors of the economy like the service sectors. For example in the service sector, tourist attraction which is difficult to replenish depends on infrastructures like the road to access tourism attraction in Tanzania like MT Kilimanjaro, Serengeti, Mikumi, Manyara, Ruaha, Zanzibar and other attractions in Tanzania.
Currently, Tanzania has invested $ 1.9 billion in SGR, $ 3.6 billion in the construction of 2.1 GW hydropower project named Stiegler’s Gorge, billions in the revival of the national airline ATC $421 million in Dar Es Salaam port expansion, and billions on other related projects not mentioned. Most of these projects have been locally financed with a little loan from developing partners. The projects are contributing while still in the construction phase and once finished these projects will bring significant impact not only Tanzanian economy but also other regions in the continent.
Tanzania is slotted on the need for a high level of development in 2018 Electricity Regulatory Index. Therefore, such requirement need development of various energy mixes, the current construction of hydroelectric power which will produce 3,780MW will double the electricity production in the country and make a total of 5,293.3MW. The energy which will be produced will boost the industrialization sector, the agricultural sector as well as the service sector in our economy.
Despite the direct contribution to strategic sectors like agriculture and industrial sectors, these projects have a significant indirect contribution to other sectors. The income generated from these projects are outputting in the economy of the country, those folks employed directly in these projects like, business industry including supply industries, service industries and other industries are earning wages and profits. It is estimated that the project like SGR has offered more than 600,000 jobs and Stiegler’s Gorge is expected to offer more than 5,000 jobs. The income will remain in the circulation of the economy thus increasing our GDP. The wages and the profit will also benefit other folks indirectly through what is called ” multiplier effect” because injection of new demand for goods and services into the circular flow of income stimulate further rounds of spending. These projects employ people who will rent the houses around the project area, eat food, buy clothes and use the money they have generated to acquire other social services within the country.
It is because of these huge investments mostly located in infrastructure development now we are witnessing the farmers to have access to the market networks, through network of roads, soon we will have sufficient electricity to preserve the perishable agricultural products, warehouses facilities of agricultural outputs, food sufficient over 95% and agriculture being first in export earning contribution. The country now is ranked first among the fastest growing economy in East Africa. Therefore if everything goes as planned; we will not just witness our living standard change to a better one but also realize our country to be one of the middle-income countries before the end of 2025.