Introduction

There is a long tradition in economics that argues that manufacturing industry is critical for economic growth, particularly at relatively low income per capita (Weiss 2011). This ‘engine of growth argument’ rests on several features of the sector:

The normal historical pattern has been that, in poor countries, the share of manufacturing in total economic activity is very low, but that as growth occurs and workers move out of agriculture, it rises rapidly. Once a threshold income level is passed the relative share of manufacturing starts to decline as demand shifts towards services. Thus for example, in 2005, manufacturing was 9 per cent of GDP in Ghana, 30 per cent of GDP in a middle- income economy like Malaysia and averaged 16 per cent in the OECD economies (Smirzai 2013: Table 1.2). It is at the transition from low to middle income status that the engine of growth effect can be expected to be greatest owing to the greater scope for a productivity boost as workers shift out of agriculture.

Experience in sub-Saharan Africa has not matched this positive story. The sector remains relatively small with much of it vulnerable to competition from imports. This chapter discusses evidence on recent Tanzanian experience in the context of industrialization in Africa more generally, drawing in some instances on empirical work by the authors. It considers industrialization in Tanzania from the perspective of economic competitiveness, and therefore should be seen as complementary to the broader discussion of the political economy of industrial development in Tanzania given in Chapter 8. We look at African experience, before turning to the Tanzanian case, and then present some empirical evidence from firm-level surveys of manufacturers in Tanzania before concluding the chapter.