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Skill Use, Skill Deficits, and Firm Performance in Formal Sector Enterprises

Evidence from the Tanzania Enterprise Skills Survey (2015)
  • Compared with non-innovators and firms primarily serving the domestic market, exporters and innovators suffer from greater skill shortages. This, in turn, impacts their investments into new technology, building new products and services, and quality assurance.
  • Firms with higher shares of tertiary-educated workers are more productive. However, the study saw no such impact of secondary and technical vocational education and training. This is a likely result of the poor quality of secondary education in Tanzania.
  • The choices that firms make about their skills mix and the strategies they use to mitigate skill gaps directly impact their productivity. Among these strategies, the most effective was to use highly-skilled expatriates, outsourcing professional services, and external training. However, in-house training offered by most firms proved ineffective.


Steps Tanzania can take to overcome its gap in workforce skills:

Improve secondary education quality. This is especially relevant in light of the government’s recent commitment to universalize secondary education. Reforms must seek to improve English and IT skills that have broad application in many jobs, as well as basic proficiency in writing, critical thinking and problem solving. 

Technical vocational education and training (TVET) requires reforms in curricula, faculty recruitment, and training as well as instructional practice oriented to industry requirements.

Expand the pool of tertiary-educated people across geographical regions. The pool of tertiary-educated workers is too small. University-educated managers are associated with higher labor productivity because they tend to recruit more skilled workers and are likely to rate education deficiencies as a big obstacle, possibly because they are aware of the gaps between what is available in Tanzania and the rest of the world. 

There’s a need for greater geographical coverage by higher education institutions. The current heavy reliance on Dar es Salaam, a major city and commercial port on Tanzania’s Indian Ocean coast, for tertiary educated workers raises costs for firms in other regions. 

Improve in-house employee training. Improving the overall quality of education and training is a timely process. However, internal and external training programs could improve firms’ productivity in the short-term. Right now, in-house training is singularly ineffective in Tanzanian firms, and they often have little resources to hire qualified outside providers. 

Expand the training role of industry associations, possibly in partnership with the Vocational Education and Training Authority (VETA) and Zanzibar’s Vocational Training Authority (VTA) – both government agencies that currently only focus on pre-employment training of TVET students. They can play a key role in developing cost-effective training programs, especially for small and medium enterprises.