In a global economy, a challenge for small economies such as Tanzania is, while providing opportunities to their people that not only advance their standards of living but also meet their aspirations, to compete both domestically and internationally. But the question is: how do you compete domestically and internationally in dire poverty and despair?
However intricate this might be, it must be breed at home. It must spring from within a country. There can not be a short-cut. There is no short-cut.
Think about the tailor on the next street; the street vendor who knocks on your door every morning selling vegetables; the engineer who makes boats that sail Lake Victoria; the farmer who sells his products to his neighbor; that smart child-begger you met in the street asking for money but deep in you heart you said, “he could make a great consultant or politician”; the number of trucks (lorries), which should indicate the level of business in the country, you see in our highways. Think about all the small businesses that Tanzanians make. They create wealth. But it is not enough. It is subsistent.
How do you improve domestic productivity so that it creates greater wealth and meets the aspirations of the people and that of the nation?
The challenges of Tanzania are many — energy for all, (excellent) education for all, health for all, water for all. The truth is that the solution to these problems is not equivalent to developing new science that can take a Tanzanian to the moon — it is much easier.
When a computer scientist is faced with such a myriad of inter-related problems he always thinks about two techniques. One is divide and conquer – where a problem is broken down into many small problems which are simpler in an effort to find the solution to the problem. Two is dynamic programming where a problem is approached from the point that a local solution is a solution to a global problem. Here he would divide the problem into small sub-problems and later combine the solutions to sub-problems to solve the more complex problem.
A spiral economy – businesses that increase domestic productivity
Suppose a group of at least five tailors founded a company. This company would employee a manager, a designer and a marketing and research department. The company would be tasked with buying fabrics in bulk at wholesale prices and distributing them among the tailors (founders) according to their demands and capacities. The tailors would go down to work turning fabrics to suits, trousers, shirts, skirts, gowns and so on. The company would buy finished clothes from the tailors and sell them across the country. The profit made would be distributed among the founders. Tailors would share the risk of investment. They would sell their products more cheaply but yet earn more money. They would, more easily, qualify for loans and other benefits from banks and the state.
Tanzania is a predominantly agricultural economy. At least 75% of Tanzanians are employed in the agriculture sector. Agriculture is practiced only once a year limiting productivity and variety of crops. The major means of production is the hand hoe. And it is subsistent farming.
Let us face the facts. The famous and perhaps best Fendt tractors are currently sold at around € 70,000 (= Tshs 154 mil.) Depending on the technology you are targeting, there are cheaper agricultural tractors such as the widely used tractors in Tanzania, Massey Ferguson. A second-hand tractor could be sold for as much as € 10,000 (= Tshs. 22 mil.) A plough such as this would cost you about € 5,000 (= Tshs. 11 mil.). So as we can see serious agriculture calls for serious investment. Roughly speaking, for a complete set of agricultural machinery an initial, good enough, investment is at about € 30, 000 (= Tshs. 66 mil). It is not possible for a current Tanzanian farmer to afford such huge investment. Actually I have a big doubt whether even our banks can afford to offer such loans without extremely strict conditions especially considering the small market size in Tanzania. The life cycle of a newly purchased tractor is well above twenty years depending on maintenance and yearly workload. So it can not but be a good investment.
To overcome this investment barrier, I turn to a similar model as above. Group at least five farmers. Combine their land as security. Get a bank to loan them. Get them the equipment. Let them share the equipment and do the farming. Urge them to start a company which manages the use of the equipment, buys agricultural products from them and markets and sells best possible processed products (e.g. Don’t sell milk that goes bad the next day. Sell processed milk that can last for at least a year.) around the country. The profit made is shared by the farmers, and hence more money in their pockets. Also in order to expand their market, a farmer could farm crops that are used as food by livestock. This would lead to healthier livestock for better productivity. Animal products would be sold at cheaper prices but for more profits.
Increased revenue for the government and how the government steps in
First, the government must encourage people to found such companies. One way would be by offering business licenses tailored to such businesses with minimal costs and bureaucracy. The government should provide experts to advise them on how to make more money from their businesses. Also the government can offer free seminars to the owners of businesses, and employees. It should also set standards.
With companies established around the country the government would deal less with individuals, serving time and being more efficient. It would be easier for the government to collect revenues through taxes which is more in value which can be used for other services such as development of a suitable health care system or improving our ageing infrastructure.
This is how you increase domestic productivity that sets you on the path to compete both domestically and internationally.
“Kidole kimoja hakivunji chawa” — one finger cannot kill a louse — is the wisdom.
These are some great ideas :)…
If i may add, people should also not be afraid to try. Ideas like the system is too corrupt, i will never make it, Or i have ni capital, what’s the use; these ideas should not supress our desire to become successful. Sometimes all we need is to take the first step and surely someday we will walk. It might take a few falls, but we’ll get there.
I agree with Neyk. Sometimes we all we need to do is take the first step. I think what Tanzania needs is a change in attitude towards farming. For years on end it’s all been about coming to the big city and ‘making it’. It’s all about a change in our mindset, it’s OK to toil the land for a living.You’re right, we need a local solution. I truly believe it can be done. The right people need to be the ones to take the first step to show how it can be done. The rest will follow.
Bihemo, thanks for this thoughtful post relating to development economics, technology and Tanzania. These are some exciting ideas.
Though I am not sure people will volunteer their time, money and effort in the initial stages because of mistrust towards eachother. Are you sure that, say, 5 farmers will come together willingly to establish such a business, and that the government will ensure a laissez faire policy for them?
Great stimulant,
I was just reading this article on the WSJ Oct 12 2011 about the US Senate passing legislation targeting China’s management of it’s currency, the Yuan. In tune with the global competitiveness theme of the above piece, it made me think, albeit in an overly macro-economic sense, why are we in Tanzania not making the most of our weak Shilling? Then I connected, we don’t produce that much. But why don’t we produce that much? We used to be among the top 3 sisal producers in the world. What happenned to cloves poduction?
I noted the author was skeptic about banks being able to provide loans “without extremely strict conditions “, and then went on to advise a collectivisation approach, which has already failed under the state sponsored “vijiji vya ujamaa”.
Earlier in the piece, mention was made of several “for all” initiatives. Energy for all even had bracketed “excellent” (not sure if this was a sarcastic heckle or not). But the “for all” model ruins it for all, from US mortgages to Tanzania’s Ujamaa villages. development should be based on merit, not some vague altruistic ambitions with no practical implementation strategy. The reason we have failed is that we have been too grand, forwarding all-encompassing programs that could hardly finance themselves sanely. We need to step away from all and any “for all” schemes, and focus on giving people some serious responsibilities and incentives to be personally liable.
Finally, as messed up as the credit system is for the developed world, mainly due to some self inflicted, greedy “Cirque du Soleil” acrobatics on their part, we could use a lot of the positives from this system. Namely jolting a whole population out of poverty by granting credit based on responsibility. It is a great challenge, given that we do not even have proper credit tracking agencies, but we could always make a start, even though some fundaments in the sense of legislative groundwork must be established first. If the Makambas of our Bunge can aspire to tie their constituencies with the world market, who is to say we cannot step in the midst of simplified title deeds and loans based on tax returns (I know you are saying “You are joking, right?”)
But I am not.
Bihemo thinks globally yet tries a lot to make his idea locally compartible, that’s cool. Many developing economies that have made it, (or at least are on the verge of doing so) invested a lot on empowering the “common Mwananchi”… for a country like Tanzania that means investing a lot in Agriculture.
The “five farmers theory” is based on the fact that they can use land as a security to secure a loan. That’s where the problem is, many of these farmers are located in deep upcountry where the land is too unworth to be considered as a security. A month ago I was in Kilindini-Tanga (an upcountry region in northeast Tanzania) we found some Guys who had just prchased 800 acres of virgin land for a mere 6millions tshs (roughly 3300$)! How do you convice a Banker to issue a loan on these Kilindini farmers? Ok let’s say the government steps in, how do the produce of these farmers get transported to price-competitive areas (which are usually urban areas)? Infrastructure is the concrete Barrier here.
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the key to growth in the agriculture section in tanzania is collective farming. most farmers have small farms here in tanzania. 2-20 acres. and most of these farmers use animals or hand when fgarming. the output is from 5-6 bags of produce(example maize) per acre . this will sell on the market for app.50000 tsh per bag. income will be app 300000 tsh per acre. with a tractor the output will be more than double.and a tractor can easily plough 15 acres per day. by hand or oks ploug it will be possible to plough maximum 5 acres in one month. many will only accomplish 1 acre if by hand,. if lets say 20-50 farmers entger in coorparation they could borrow the money in the bank to buy own tractor and plough for lets say 12000 usd. of course second hand tractors which are plenty in europe. the tech is sufficient for tanzania. not new tractors from pakistan. old english fords or masseyferguson. . Each farmer will borrow from 200-500 usd and each farmer will plough 10-20 acres. outgput per acre? app 300-400 usd. This is the way forward for tanzanian agriculture. we did this in europe 50-100 years ago. and it worked. agriculture has to be the backbone of this country. especially with the soaring food prices. all it needs is banks and farmers working hand in hand. This kind of coorp can start with 1 tractor and the next year multiple. of course depending on rainfall and so on. some areas is more suitable then others.
by the way. sorry for my broken writing and spelling. i am just trying to make a point.farming has huge potential in tanzania. one big tractor can easily farm 500 acres in one month. output per acre is frfom 600000- 1500000 tsh per acre. so do the math. this is big big busines. and food prices is increasing 20- up % a year inthese days. tanzania has 10 mill arrable land. do the math again. we are talking billions of dollars here. many asian, arab countries is buying farms in africa these days. also in tanzania. Why? it is a hige business because of the cheap labour cost and the very fertile soil. tanzania is so rich on ressources. she just have to wake up-