Rural Nonfarm Enterprises in Tanzania’s Economic Transformation

Abstract

Since the beginning of the twenty-first century, Tanzania’s economy has grown more rapidly than at any other point in recent history. Between 2000 and 2015 average annual GDP growth was 6.8 per cent and average annual labour productivity growth was more than 4 per cent. This is quite impressive when considering the 2.7–3.0 per cent annual population growth rate and a similar growth rate in the labour force during this period. Moreover, between 2002 and 2012 more than three quarters of this labour productivity growth was accounted for by structural change; the remainder of the growth is largely attributable to within sector productivity growth in agriculture. The growth attributable to structural change is almost entirely explained by a rapid decline in the agricultural employment share and an increase in the non-agricultural private sector employment share (Diao, Kweka, and McMillan 2017). In spite of these changes, Tanzania remains heavily rural; between 2002 and 2012, the share of the population living in rural areas declined by only 6.5 percentage points from 76.9 to 70.4 per cent (Table 8.1). The share of youth living in rural areas undergoes a slightly greater decrease. However, as shown in Table 8.1, more than 60 per cent of youth still live in the rural areas in 2012. Living in rural areas is typically associated with farming, including for youth. But the statistics also show that between 2002 and 2012, the share of the rural population engaged in agricultural activities decreased by almost 10 percentage points (Table 8.1). This is also true for the youth cohort at the national level. While the absolute number of rural agricultural employment continues to increase, the growth rate of rural non-agricultural employment is much faster as shown in Table 8.1.