Tanzania - Economy

Economy

The economy is mostly based on agriculture, which accounts for more than half of the GDP, provides 75% (approximately) of exports, and employs approximately 75% of the workforce. Topography and climate, though, limit cultivated crops to only 4% of the land area. The nation has many natural resources including minerals, natural gas, and tourism.

Extraction of natural gas began in the 2000s. Gas is drawn into the commercial capital, Dar Es Salaam and exported to various markets overseas. Tanzania has vast amounts of minerals including gold, diamonds, coal, iron, uranium, nickel, chrome, tin, platinum, coltan, niobium, and others. It was announced in February 2012 that the collapsed volcano approximately 200 km north of Mbeya, Mount Ngualla, contained one of the largest rare earths oxide deposits in the world.

Tanzania is the third-largest producer of gold in Africa after South Africa and Ghana. The country is also known for Tanzanite, a type of precious gemstone that is found only in Tanzania. The mineral sector started to pick-up slowly in the late 90s; major discoveries are announced regularly. However, the mineral sector has yet to start contributing significantly to the overall Tanzanian economy, and industry is still mainly limited to processing agricultural products and light consumer goods.

Growth from 1991 to 1999 featured industrial production and a substantial increase in output of minerals, led by gold. Commercial production of natural gas from the Songo Songo island in the Indian Ocean off the Rufiji Delta commenced in 2004, with natural gas being pumped in a pipeline to Dar es Salaam, the bulk of it converted to electricity by both public utility and private operators. A new gas field is being brought on stream in Mnazi Bay.

Recent public sector and banking reforms, as well as revamped and new legislative frameworks, have all helped increase private-sector growth and investment. Short-term economic progress also depends on curbing corruption.

Prolonged drought during the early years of the 21st century has severely reduced electricity generation capacity (some 60% of Tanzania's electricity supplies are generated by hydro-electric methods). During 2006, Tanzania suffered a crippling series of "load-shedding" or power-rationing episodes caused by a shortfall of generated power, largely because of insufficient hydro-electric generation. Plans to increase gas- and coal-fueled generation capacity are likely to take some years to implement, and growth is forecast to be increased to 7% or more per year.

There are two major airlines in Tanzania: the Air Tanzania Corporation and Precision Air; both provide local flights to Arusha, Kigoma, Mtwara, Mwanza, Musoma, Shinyanga, Zanzibar and regional flights to Kigali, Nairobi and Mombasa. There are also several charter firms and smaller airlines, such as Bold Aviation Ltd., Tropical Air and Coastal Aviation Ltd. There are two railway companies: TAZARA provides service between Dar-es-Salaam and Kapiri Mposhi, a district of the Central Province in Zambia. The other one is the Tanzania Railways Corporation, which provides services between Dar-es-Salaam and Kigoma, a town on the shores of Lake Tanganyika and between Dar-es-Salaam and Mwanza, a city on the shores of Lake Victoria. Several modern hydrofoil boats also provide transportation across the Indian Ocean between Dar-es-Salaam and Zanzibar.

Tanzania is part of the East African Community and a potential member of the planned East African Federation.