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publication December 11, 2019

Tanzania’s Path to Poverty Reduction and Pro-Poor Growth

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Photo: World Bank


STORY HIGHLIGHTS

  • The 2019 Tanzania Poverty Assessment highlights Tanzania’s continued economic growth and poverty reduction over the past 10 years
  • The analysis notes that continued efforts by the government to improve service delivery helped to drive reduction in poverty
  • However, the report warns that a large proportion of the population remains vulnerable to falling into poverty and provides recommendations to increase jobs and drive growth

DODOMA, December 11, 2019 – During the past decade, Tanzania recorded sustained economic growth and a persistent decline in poverty, according to a new World Bank poverty analysis.

The 2019 Tanzania Mainland Poverty Assessment notes that poverty decreased by eight percentage points in 10 years, down from 34.4% in 2007 to 26.4% in 2018. Country poverty assessments provide information on the causes and impact of poverty in a country, and examine how public policies, expenditures and institutions affect poor citizens.

“Continued government efforts to improve living conditions have resulted in a sustained increase in access to basic services and improvements in human capital outcomes, which in turn have helped to reduce poverty,” said Bella Bird, World Bank Country Director for Tanzania, Malawi, Zambia and Zimbabwe. “The sustained reduction in poverty is welcome news but it is important for Tanzania to accelerate the pace of poverty reduction as the number of poor people remains high.” 

Today, Tanzania records 14 million poor people, up from 13 million in 2007. Moreover, the report notes that a significant proportion of the population remains vulnerable to falling into poverty and about half of the population continues to live below the international poverty line of $1.90 per person per day (in 2011 purchasing power parity.)

“Along with the reduction in poverty, the country is showing signs of a structural transformation,” said Nadia Belhaj Hassine Belghith, Senior Economist and co-author of the 2019 Tanzania Mainland Poverty Assessment. “More people are moving towards industry and services, reducing the overall share of employment in agriculture. Those who stay in agriculture are also diversifying towards non-farm wage and self-employment.”

 Key findings from the poverty assessment include:

  • In addition to the reduction in basic needs poverty, extreme poverty (reflecting inability to meet minimum food needs) declined from 11.7% in 2007 to 8.0% in 2018. The depth of poverty also declined.
  • Most of the reduction in poverty was witnessed in rural areas, followed by urban areas outside Dar es Salaam.
  • The pace of poverty reduction however, has slowed down since 2012. During 2007–12, poverty averaged a decline of one percentage point a year, but this lowered to 0.3 percentage points per year in 2012-18.  
  • The impact of economic growth on poverty reduction has dampened in recent years. During 2007-12 a 10% increase in gross domestic product per capita growth produced a 10% decline in the proportion of poor people. This has declined to 4.5% in 2012-18.
  • Consumption growth became less pro-poor and inequality has increased. The Gini coefficient went up from 38.5 in 2007 to 39.5 in 2018.
  • Vulnerability is also still high: for every four Tanzanians who moved out of poverty, three fell into it. A large number of non-poor people living just above the poverty line are at risk of slipping below it.
  • Productive social safety nets’ programs can play an important role in reducing vulnerability to poverty. The findings suggest that without the TASAF PSSN there would be an additional one million poor people in 2018.
  • Today, poor families are burdened with a large number of dependents, lower access to basic services and particularly low human capital, limiting their potential to access productive employment opportunities. Less than one-third of Tanzanian children currently enroll in lower secondary school.
  • More importantly, poor parents pass on their poverty to their offspring. Both economic and social mobility remain low in Tanzania.
  • Significant gaps in living standards persist between rural and urban areas. Rural households lag considerably behind their urban counterparts in almost all monetary and non-monetary dimensions of poverty.
  • That said, disparities in well-being within urban areas are becoming more pronounced. Both consumption inequality and inequality of opportunity are higher in urban areas than in rural areas.
  • Beyond the rural-urban divide, significant regional disparities in living standards persist. Poverty is highest among the lake zone districts, which are further disadvantaged in terms of vulnerability to climate-change induced natural disasters.

Structural transformation, the process where people move out of low productivity agriculture into more remunerable activities, will determine whether Tanzania can pull itself out of poverty going forward, according to the report. Despite the noticeable transition of labor from agriculture to industry and services, the share of agriculture in total employment remains high (at 58%, reaching 79% among the poor) while it continues to contribute far less to value-added than these other sectors. There is also a need for further market orientation and value addition in the agricultural sector, as was discussed at the recent  launch of the 13th Tanzania Economic Update, Transforming Agriculture - Realizing the Potential of Agriculture for Inclusive Growth and Poverty Reduction.

In addition, the report notes that the more productive industry and service sectors favor the more educated and the better off, perpetuating inequities in access to productive employment opportunities. This, coupled with the distressingly low level of educational attainment in the overall population, keeps a majority of the population stuck in informal sector wage and self-employment. Most businesses remain small and unregistered, or stop operating when they are still young, and operate without fixed business location. They also lack access to formal sources of finance, limiting their growth potential.

Going forward, the report recommends that Tanzania needs to invest in human capital and skills development of its current and future workforce while increasing the job generation by key sectors that drive growth. This needs to be coupled with a better enabling environment that fosters small firms growth and survival chances, furthers agricultural transformation, and reduces vulnerability to negative domestic and international economic and weather shocks.