The Tanzanian government has established a Textile Development Unit (TDU) as part of its Ministry of Industry and Trade in order to encourage investments and improve the ease of establishing business in the nation. TDU will serve as a guide for investors to learn about the sector and the benefits and incentives investment will afford, plus provide practical information on setting up shop in the country.
Tanzania’s low wages, low electricity costs, extensive cotton production and prime positioning for land and sea access to major markets like Kenya, make the market advantageous for sourcing, but TDU said the country’s potential has been “under-exploited.”
As part of the East African Community (EAC), which is set to see the most growth in terms of sourcing from the region, Tanzania will also soon have duty free access to the European Union.
The European Commission said last week that it has finalized a deal, called the Economic Partnership Agreement (EPA) that would allow for products from EAC countries Burundi, Kenya, Rwanda, Tanzania and Uganda to have long-term free and unlimited access to the E.U. market.
Duty free access to the U.S. market for textiles and garments is, for now, also afforded under the African Growth and Opportunity Act (AGOA), which expires next year and renewal prospects remain unclear.
According to East African Business Week, Tanzania is one of the most stable nations in the developing world. “In recent years, investment in the sub-sector has grown quickly –with new and existing businesses already seeing substantial gains,” the publication noted. “The root of these successes is clear; Tanzania is a rare example of a country which can support a profitable, integrated manufacturing value chain from cotton field to finished garment production. In addition, there are opportunities for joint venture partnerships.”
Tanzania is undergoing rapid economic transformation, and its domestic and regional markets are both growing. The country’s government has set its sights on reaching middle-income status by 2025, and manufacturing will be the key driver in the journey there.
The EAC country exported $70 million with of goods to the U.S. in 2013, down nearly 39 percent from the previous year, but up 190 percent from 2003. Spices, coffee, tea, gemstones and knit apparel were among the top import categories. Comparatively, Tanzania imported $420 million worth of goods from the U.S. Demand for knit apparel is high in the domestic market to replace the current high volume of imports.
In terms of cotton, the country’s production of seed cotton increased from 200, 664 metric tons for the 2007/08 crop year to 244,892 metric tons in the 2013/14 season, a 22 percent rise. Tanzania’s production levels have varied as a result of price and weather instability in recent years, but the country has introduced contract farming in some of its growing regions, which has already led to higher, more stable yields and better quality cotton.
Some say Tanzania is well positioned—both physically and economically—to take advantage of increasing demand for imported clothing from EAC regional markets, and regional exports could replace current imports from Asia.
“Tanzania boasts a large domestic market and emerging middle class, pushing up demand for quality garments. The situation is replicated across many East and Southern African countries, creating a substantial regional market for apparel,” East African Business Week reported.