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Harnessing Tanzania's Rapid Urbanization to Create Jobs, Thriving Cities

STORY HIGHLIGHTS
  • By creating industrial and business policies that cater to the country’s booming cities and urban populations, Tanzania’s policy makers could create large numbers of new jobs for its citizens
  • The country is experiencing rapid urbanization; by 2030, more Tanzanians will live in urban areas than in rural areas and Dar es Salaam could grow to a projected 10 million people
  • The labor force is expected to double within the next 15 years, and Tanzania will need to create more than one million jobs to absorb the large number of youth joining the labor market each year

DAR ES SALAAM, June 24, 2014 – Tanzania could create large numbers of new, productive jobs for its people, especially young adults, if policy makers fostered industrial and business policies that cater to the country’s booming cities and urban populations, according to the fifth Tanzania Economic Update released today.

The report, Who Wants a Job? The Magnetic Power of Cities, examines prospects for economic prosperity within the context of the country’s rapid urbanization. By 2030, it is projected that more Tanzanians will live in urban areas than in rural areas, with Dar es Salaam alone exceeding 10 million people. A walk through the busy Kariakoo area of Dar es Salaam today confirms this projection--many of the vendors and hawkers in the area were not born in the city but have migrated here in hopes of finding better job and education opportunities, and a better life for themselves.

“There is no doubt the Tanzanian economy has been doing well over the past decade,” says Philippe Dongier, the World Bank Country Director for Tanzania, Burundi and Uganda. “But it is also true that the economy has failed to create enough productive jobs for a rapidly growing labor force. Today, there are approximately 23 million Tanzanians in the job market, and is expected to reach 45 million people by 2030 who have high hopes of a decent job and a good life.”

Despite Tanzania's good macroeconomic performance over the past decade, the economy has not been able to generate enough productive jobs for a fast growing labor force, which is expected to double in the next 15 years. Tanzania will need to create more than one million jobs in order to absorb the large number of youth joining the labor market each year.

One way to do this is to harnesses the country’s exploding urban expansion, and focus on fostering industry growth.  If well managed, urbanization can offer an opportunity for accelerating the transformation of the Tanzanian economy towards more manufacturing and services, thus creating new types of jobs.  Thus far, the increase in urban populations has led to the growth of non-farm businesses in urban centers which have been increasing by almost 15% per year.

Despite this, running a business in urban Tanzania remains challenging. While key constraints vary according to the nature of the business, its sector, and its geographical location, the most important include the lack of the required skills of the labor force; lack of access to external finance; the  cost of connectivity; burdensome and insecure administrative environment; and the weak rule of law.

Although there is no blue print for harnessing the potential for growth of urban businesses, a minimal set of improvements is needed to address the low level of skills in the labor force, high congestion costs, administrative barriers and insecurity, and obstacles that hinder businesses from achieving economies of scale. Such efforts will require a significant policy change at the core, rather than at the margins, and strong leadership from both the public and private sectors.