Tanzania’s Manufacturing Sector Struggles with Shilling Shortage—Government Responds

Even as Tanzania’s dollar shortage eases, a new financial strain is affecting the country’s manufacturing sector: a shortage of Tanzanian shillings in business circulation. This issue, industry leaders say, is now hampering operations and limiting growth in the sector, creating a need for immediate government support. Manufacturers raised their concerns at the 18th President’s Manufacturer of the Year Awards, hosted by the Confederation of Tanzanian Industries (CTI) in Dar es Salaam on Friday, November 8, 2024. 

The award ceremony celebrated the achievements of leading companies like TCC Cigarette Company, Alaf Roofing Company, and Plasco Company, recognized for their top performance in the industry. However, discussions among industry representatives quickly turned to the financial struggles manufacturers are facing due to cash flow issues and the limited availability of shillings. These issues, they say, have been exacerbated by delayed payments to contractors. They urged the government to expedite these payments as a means of alleviating the liquidity challenges hampering the sector.

Government’s Commitment to Industry Support

Vice President Dr. Philip Mpango, who attended the event, reassured manufacturers of the government’s commitment to address the shilling shortage and outstanding contractor payments. He emphasized that stabilizing the financial environment would provide a crucial support system for locally produced goods and establish a more resilient market.

“The industrial sector has the potential to transform our economy,” Dr. Mpango said, noting the industry’s capacity to create jobs, foster innovation, and drive technological advancement. However, he also highlighted that despite these benefits, the sector’s contribution to the country’s GDP remains modest, standing at 8.1 percent, with an annual growth rate of 8 percent over the past decade.

In his address, Dr. Mpango called for efforts to further increase the sector’s impact, citing encouraging figures that reflect its rising contribution to foreign revenue—from $0.9 billion in 2020 to $1.4 billion in 2023. He encouraged stakeholders to continue working on solutions that would bolster the industry’s output and, in turn, Tanzania’s economy.

Key Challenges in the Manufacturing Sector

The Vice President also pointed out that while the sector holds significant potential, it faces pressing challenges. These include limited access to capital, a shortage of skilled labor, gaps in infrastructure, and burdensome tax policies. “I urge CTI to identify high-growth sub-sectors that can tackle these obstacles and achieve greater success, both locally and across the region,” he remarked.

Echoing these sentiments, CTI Chairman Paul Makanza voiced his concerns about the ongoing cash flow crisis. He noted that while dollar availability has improved, the shortage of shillings has now taken center stage, compounded by delayed contractor payments which are disrupting industrial operations.

“The shortage of shillings, coupled with delayed payments to contractors, is hindering manufacturers from maintaining the momentum of growth,” Mr. Makanza explained. He appealed to the government to step in with measures that would inject liquidity into the sector, sustain industrial growth, and keep local production moving forward.

Government Initiatives to Improve Business Conditions

Deputy Minister of Industry and Trade, Exaud Kigahe, highlighted the government’s commitment to improving the business climate for manufacturers. He noted that several policy adjustments have already been made to support the industry, contributing to its recent progress. 

“All obstacles hindering the industrial sector have been addressed,” Mr. Kigahe affirmed, underscoring that the government’s focus remains on building a supportive environment that enables industries to thrive.

The discussions at the President’s Manufacturer of the Year Awards highlighted the importance of a collective approach to addressing the challenges facing Tanzania’s manufacturing sector. With manufacturers and government officials alike voicing a commitment to resolve these issues, there’s hope that effective solutions will emerge to support the sector’s ongoing development.