November 20, 2019 marked the Africa Industrialisation Week. The importance of having industrial economy in this fundamentally agrarian continent cannot be overemphasized. Measured against a number of metrics, Africa is relatively less developed than most of other parts of the world.
These other parts have by and large developed thanks to industrialisation. The industrial sector is important for economic growth, development and poverty reduction.
However, there are a number of challenges that captain and titans of the industry in Africa face in the industrialization journey.
Some of these are outlined in Tanzanian context but hopefully they mirror situation elsewhere in Africa as we mark the continent’s industrialisation week.
Africa’s Industrialisation Week
The continental industrialisation day in Africa for 2019 was commemorated as part of the African Union (AU) Commission’s flagship Africa Industrialisation Week (AIW-2019).
The week stretched from November 18th to 22nd 2019. It emphasized the crucial role of industrial parks and Special Economic Zones (SEZs) to drive Africa’s industrialisation with the aim of the continent to benefit from industrialization gains.
Labour issues
Challenges in the industrialisation labour space include inadequate quantity and quality of skills and talents in the market.
Skills that are in short supply relative to the demand for the same include soft skills such as trust, creativity, innovation, team spirit, communication, courage and many others along that line. There is also scarcity of hard skills especially for some particular industrial experts.
Other challenges have been related to workers discipline and mentality as well as work and residence permits including their costs and time taken to be granted.
There is also mismatch between skills supply and demand leading to low productivity.
Unfair competition
Generally competition is healthy for consumers and producers. Unfair competition however is unhealthy.
Some Tanzanian industrialists face the challenges of unfair competition. These include competition via the routes of cheap imported industrial goods.
Others are illicit trade that brings counterfeits and sub-standard industrial goods in the market.
When the initial position is not at a level-playing ground, the affected industrialists may not be able to take off let alone growing and prospering.
Regulations
Regulations have good aim of protecting both producers and consumers. They are good in ensuring that no one abuses his or her market power.
What becomes challenging in Tanzania include multiple regulations some of which are contradicting each other. There have also been multiple and high regulatory fees, many regulators as well as lack of one stop centre for the multiple regulators.
All these inflate the cost of doing business and therefore leading to reduced industrial sector competitiveness. Of the key challenges related to regulations is predictability of regulatory frameworks.
The 2018 Blue Print and its May 2019 Road Map for implementation stand to deliver solutions by fixing what is broken in the regulations space.
Tax issues
Tax issues that stand to challenge those venturing in the industrial sector include predictability of fiscal regime, high tax rates, multiplicity of taxes and long time taken for tax refunds. Other challenges include tax incentives misuse by some beneficiaries that constitutes unequal playing ground from competition perspectives.
Other tax challenges include tax avoidance, evasion and illicit financial flows; challenges related to the use of Electronic Fiscal Devices (EFDs); Skills Development Levy (SDL) high rates and its use in other areas than in developing skills for industrialisation.
Others challenges are related to easy of paying taxes including estimation methods and inadequate one stop centre for paying taxes.
The 15 percent upfront payment of import duty on industrial sugar has been a specific challenge for industries using this factor input.
It is worth noting that there have been many reforms to address some of the above challenges by the authorities including the Ministry of Finance and Planning through Tanzania Revenue Authority (TRA).
Corruption
Corruption increases cost of doing business, presents non-level playing ground for example in procurement, brings sub-stand goods and services in the industrial factor-input and final output markets.
Technology
Availability of and access to recent technologies for industrialisation is challenging in Tanzania. Challenging too is upgrading of existing technologies to cope with today’s state of the art high technology.
Value chain issues
Supply and value chain linkages are disorganised generally. This leads to challenges related to reliable supply of industrial factor inputs as well as factor outputs. This includes lack of adherence to agreed supply schedule in quantity and quality, agreed frequency and time etc.
