Question 22N.2.HL.TZ0.1g
| Date | November 2022 | Marks available | [Maximum mark: 15] | Reference code | 22N.2.HL.TZ0.1g |
| Level | HL | Paper | 2 | Time zone | TZ0 |
| Command term | Discuss | Question number | g | Adapted from | N/A |
Text A — Overview of Tanzania
- Tanzania is one of Africa’s fastest growing economies with an average of 7% annual economic growth since 2000. It is a politically stable country, rich in wildlife and natural resources. However, the growth has been concentrated in urban manufacturing, using capital intensive production. The benefits from this growth have not reached all people and significant inequalities exist between urban and rural areas. Although the relative poverty rate has fallen over the last 15 years, the number of people living in absolute poverty has increased.
- Most people are employed in the slow-growing agricultural sector that relies on unskilled labour. Although incomes increased from 2008 to 2018, the demand for agricultural goods only increased by 21% during this time period. Over 70% of Tanzania’s population lives in rural areas, relying on subsistence farming with limited tradable crops. Only 30% of land is being used for agricultural production. With investment, the remaining unused land could be developed and generate income for farmers.
- The rural sector struggles to meet Tanzania’s food requirements due to low levels of skilled labour and productivity. Additionally, high youth unemployment leads to large numbers of unskilled rural youth migrating to the cities, often finding employment in the informal sector where wages and working conditions are poor. Insufficient investment and lack of government support for diversifying the agriculture sector have been blamed for the persistent inequalities and poverty.
- Tanzania’s cities have experienced a growing middle class with strong purchasing power and political influence who have placed demands on the government for cheaper electricity, better infrastructure, and more imported goods. In response, the government provided subsidies for electricity in city centres and tax benefits to foreign companies operating in Tanzania. There is concern that these measures may worsen inequality and lead to social unrest.
- The growth of Tanzania’s manufacturing and service sector was funded through aid and large government borrowing, resulting in high national debt. Most of the government borrowing was from foreign sources and in US dollars (US$), which is a concern due to a recent depreciation of the Tanzanian shilling (Tanzania’s currency) against the US$. Some of the debt was borrowed domestically and placed upward pressure on interest rates. Higher interest rates have resulted in crowding out but helped keep inflation under control.
Text B — Strategies and opportunities for Tanzania
- Previous governments have used interventionist supply-side policies to improve access to water, education, and health services. However, the health service improvements are not keeping up with population growth and many young people are still not completing secondary school. Infrastructure has improved, but it is still insufficient as producers in the rural sector find it difficult to reach markets and access supplies.
- Aid organizations are currently supporting new sustainable businesses in rural areas through training programmes, especially for women and young people, who make up most of the unemployed in rural areas. Economists have advised the government to improve access to credit through microfinance organizations and to simplify regulations to make it easier to start new businesses.
- The government is establishing property rights in rural areas to provide security for farmers. Historically, farmers could easily lose their land, which reduced their incentive to invest in productive farming methods. The government wants to develop Tanzania’s land resources and lower its reliance on imported food. To reduce food imports, a subsidy will be granted to dairy farmers to allow them to compete against imported dairy products.
- Tanzania is a member of the East African Community (EAC) customs union and common market. However, Tanzania needs to improve human capital and encourage diversification so that the benefits of regional integration can reach the poor. These policies can also help attract foreign direct investment (FDI). Opportunities for growth through trade will expand as the EAC works towards becoming a monetary union in 2024.
Text C — Oil pipeline to be constructed
Tanzania and Uganda plan to construct a major oil pipeline from Uganda through Tanzania, ending at a port in Tanzania. This will attract FDI which could help fund infrastructure and generate jobs. However, environmentalists are concerned about potential ecological damage due to the waste created during the construction of the pipeline. Economists have suggested the waste could be avoided through a circular economy approach in the planning and construction stage.
Table 1: Economic data for Tanzania
Table 2: Development data for Tanzania
* Estimate
[Source: Text A Johnson, M., 2021. Economic Growth and Trade [online] Available at: https://www.usaid.gov/tanzania/economicgrowth-
and-trade [Accessed 4 April 2021]. Source adapted.
World Bank. 2019. Tanzania Mainland Poverty Assessment. World Bank, Washington, DC. © World Bank.
https://openknowledge.worldbank.org/handle/10986/33031 License: CC BY 3.0 IGO.
Text B Johnson, M., 2021. Economic Growth and Trade [online] Available at: https://www.usaid.gov/tanzania/economicgrowth-
and-trade [Accessed 4 April 2021]. Source adapted.
World Bank. 2019. Tanzania Mainland Poverty Assessment. World Bank, Washington, DC. © World Bank.
https://openknowledge.worldbank.org/handle/10986/33031 License: CC BY 3.0 IGO.
Text C United Nations Development Programme, 2020. Human Development Report 2020 The Next Frontier: Human
Development and the Anthropocene [online] Available at: http://hdr.undp.org/sites/default/files/Country-Profiles/
TZA.pdf [Accessed 4 August 2021]. Source adapted.
Table 1 The World Bank, 2021. [online] Available at: https://data.worldbank.org/country/tanzania License CC BY 4.0.
[Accessed 4 April 2021]. Source adapted.
Table 2 The World Bank, 2021. [online] Available at: https://data.worldbank.org/country/tanzania License CC BY 4.0.
[Accessed 4 April 2021]. Source adapted.]
Using information from the text/data and your knowledge of economics, discuss the different barriers to economic growth and to economic development faced by Tanzania.
[15]
Command term
“Discuss” requires candidates to offer a considered and balanced review that includes a range of arguments, factors or hypotheses. Opinions or conclusions should be presented clearly and supported by appropriate evidence.
Definitions may include:
Economic growth
Economic development
Interventionist supply-side policies
Economic models to support analysis may include:
- Lorenz diagram
- ADAS diagram
- Poverty cycle
- PPC
Possible barriers to economic growth and/or economic development in Tanzania may include a discussion on some of the following:
Increasing absolute poverty
- Absolute poverty means that people do not have access to basic needs, trapping them in the poverty cycle and limited possibilities for economic growth and development. (Text A, paragraph [1], Table 2)
- But relative poverty has fallen possibly explained by the divide between urban and rural areas (Text A, paragraph [1], Table 2)
- Although HDI has improved, the HDI country ranking is lower, meaning that Tanzania’s economic development has not improved as much compared to other countries (Table 2).
Rising inequality:
- Gini coefficient has increased from 2000-2018 (Table 2), may lead to problems with social unrest (Text A, paragraph [4]).
- Persistent inequality has not allowed for all people to benefit from the economic growth (Text A, paragraph [1])
- Rural – urban inequalities (Text A, paragraph [1], Table 2 data)
- growth has not reached rural areas due to the focus on manufacturing and service industries (Text A, paragraph [1])
- Most of the population is employed in agriculture (Text A, paragraph [2]), limited opportunity for higher skilled jobs, which leads to higher incomes, better human capital, supporting further economic growth and development.
- Rural areas have less access to electricity (Table 2), less economic development, also may inhibit new businesses and investment needed in rural areas (Text A, paragraph [3]).
- Urban middle class accessing more resources (Text A, paragraph [4]), resources may not be used in areas of need hindering economic development and economic growth.
- Higher youth unemployment (Table 1), youth may be less skilled/experienced and therefore may find it more difficult to find jobs leading to lower growth and development.
Limited infrastructure:
- Insufficient infrastructure is significant as it supports the functioning of an economy and the ability for the population to conduct economic activity hindering economic growth. (Text B, paragraph [1]).
- Inappropriate provision of infrastructure - urban rather than rural (Text A, paragraph [4]), leading to less opportunities for economic growth and development.
- Farmers complaining that they cannot reach markets or suppliers due to lack of infrastructure (Text B, paragraph [1])
- Insufficient infrastructure may slow down potential land development, which is currently only using 30% (Text A, paragraph [2]) limiting economic growth and access to increased income opportunities in the rural areas.
Low levels of human capital:
- Rural sector only involved in unskilled work, so population not developing human capital (Text A, paragraph [2]), limiting opportunities for economic development.
- Economic growth focussed on capital intensive manufacturing/services (Text A, paragraph [1]), limiting opportunities for developing human capital and economic development.
- Education spending has decreased (Table 2).
- Numbers of students completing secondary school has fallen (Table 2).
- Currently not exploiting opportunities EAC may offer the low-income earners as human capital needs improving (Text B, paragraph [4])
- Less significant over time if aid programmes are successful (Text B, paragraph [2]).
Access to healthcare
- Improvements in healthcare struggle to keep up with population growth (Text B, paragraph [1]).
- Government spending on healthcare has decreased (Table 2).
- Leads to poor human capital - traps people in the poverty cycle.
Rural sector barriers/Reliance on primary sector:
- Poor productivity in the rural sector (Text A, paragraph [3]).
- Lack of investment (Text A, paragraph [3]).
- Low YED (Text A, paragraph [2]) leads to limited growth - economic growth needed for economic development.
- However, a new oil pipeline might bring in FDI, fund infrastructure and create new jobs. (Text C, paragraph [1])
- Aid and government programmes could encourage new business development (Text B, paragraph [2])
- Lack of tradable crops and land resources not fully utilised to fully capacity (Text A, paragraph [2]).
Level of external and government (national) debt:
- Financing repayments could take funds away from development initiatives (Table 1, Text 1 paragraph [5])
- Significant at the moment with the depreciating currency (Text A, paragraph [5]), but may be less of an issue if there is increased FDI (ECA and oil pipeline) inflows which may increase the demand of the currency and therefore the value. (Text B, paragraph [4], Text C, paragraph [1]).
Informal Sector:
- Number of migrating youths are employed in the urban informal sector\ where working conditions are poor and unlikely to develop human capital (Text A, paragraph [3]).
Access to credit:
- Economists advised government to improve access to credit. If farmers cannot access credit, it is difficult for them to access capital needed to diversify. (Text B, paragraph [2]).
Property rights:
- Lack of property rights has historically disincentivized farmers to invest in production, leading to low skills/productivity. Less significant now as the government has begun to introduce clear property rights. (Text B, paragraph [3]).
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
A maximum of [9] should be awarded if only economic growth or economic development is discussed.
While there were some excellent responses (more than in the recent past), too many responses were generic and not focused on the question being asked, with some discussing solutions needed to achieve economic growth and development instead of the effect of the different barriers on economic growth and development.
Many relied on explaining / listing barriers in general rather than using the text appropriately. Good answers utilised the text to explain the effects of the barriers on both economic growth and development.
There is still a tendency for students to address economic growth and, without appropriate analysis / justification, simply state that this growth leads to economic development.
A significant number of answers were basically repeating the text without addressing the question.
Some candidates drew AD/AS diagrams with AD and/or AS contracting when the text indicates clearly Tanzanian economy was growing. Some stated that the informal economy was not reflected in GDP figures although some governments do adjust their statistics to capture this element of their societies.
