Report No. 647-TA
Idi Ldid               IfIUUsvLIIdl            ndI IU
Mining sector Survey
Volume Ill: Annex Ill: Current Status and Development Prospects of
Engineering and Basic Metal- Industries and
Annex IV: Current Status and Development Prospects of
Li Ilf  I AItf/Llt  II IUUnUY
March 31, 1975
indus ial Proj c  epartment
Not tor rUdr Use
Document of the International Sank for Reconstruction arTd Development
International Development.Association
This report was prepared-for ofticiafl'use only by the Bank Group It may n6t
be published, quoted or cited withouttBank Group authorization The Bank Grouri ddes
not accept respnpstbrlity for Lhe accuracy or completeness of the.eport.



I 1 Tanzanian Shilling           =  US$0.14
1 US$                          =   7.14 Tanzanian Shillings
This report is based on the findings of a mission to Tanzania in
September 1974 consisting of P. Bottelier, A. Choksi, A. Drysdall
(consultant), L. Graham (consultant), D. Papageorgiou and A. Sandig.



TANZANIA
INDUSTRIAL AND MINING SECTOR SURVEY
Struct-ure of Re2port
VOLUME I              -      MAIN REPORT
ANNEX I - THE PRICING OF
TTMrT°TLIW'V   AT  ('Ar%fT%
,,~~~~~~~ ~~~~~ ~A X%ThT1T7  T T  f'  1flr3VV¶TIt  rl'M1A  TTTtI
VOL'U'MiEl I_L             IAUINI.A  - .U dNJ SiTATUS
AND DEVELOPMENT PROSPECTS
OF THE MINING SECTOR
VOLUME III            -      ANNEIII - CURRENT STATU'S
AND DEVELOPMENT PROSPECTS
OF ENGINLEKILNG AND BASIC
METAL INDUSTRIES
ANNEX IV - CURRENT STATUS
AND DEVELOPMENT PROSPECTS
OF THE TEXTILE INDUSTRY






ANNEX III
CURRENT STATUS AND DEVELOPMENT
PROSPECTS OF ENGINEERING AND BASIC
METAL INDUSTRIES IN TANZANIA
Table of Contents
Page No.
Summary and Conclusions .............................       1
Coverage.                                                  3
Organization of this Annex.                                4
CIIAPTER I:     Present Status, Structure
and Efficiency.                           5
Past Growth Trends.                         5
Size and Location of Industries             6
Company Structure and Ownership             6
The Informal Sector.                        7
Fabricated Metal Products.                  8
Mechanical Machinerv and Eauinment          8
Electrical Appliances.                      8
Transport Eqiuinmpnt                        9
Basic Mletal Products.                      9
Capacity Uti1ization                       10
The Efficiency of Local Production    ...  10
Suply Pr            . ..........-.. ..     13
Labor and Management Constraints           14
Training and Technical Education-          14
Wages, Labor Costs and Labor
Productivity.15
Exports of Engineering Products.16
CHAPTER II:     Identification of Priority Projects   ..   17
The Scope for Further Import
Ct ULJOs L.1 L%uL. 4.JL.1 7
Review of Engineering Sector Projects
TUnduerTImplem.en-aton or Acti4ve
MiU  F .LUP..L~~1   LQLV .J.AJLL   P'A  rL L.A. V
Consideration by the Government    ....  18
New Project FLOssiblJ.tes                 9I
Products Eligible in Principle for
ImPoULL DUUbLJLULLU11                    17



Table of Contents (continued)
Page No.
Implementation of Engineering Sector
Development Strategy and Export
Possibilities    .......   ...............  20
CHAPTER III:    The Growth of Metal ConsumDtion and the
Demand for Primary Iron and Steel     ..  22
Tanzania's Steel 2Iill Project   ....  .... 22
Prpqpnt Mpt-al Uqsagp           - = Q - .............................22
Future Usage   ..............  o ..........  23
Statistical Appendix



ANNEX Ill.
Page 1
SUMMARY AND CONCLUSIONS
1.        In spite of rapid output growth in the last decade, Tanzania's
engineering sector is still in a very early stage of development. Its share
in the output of, value added by, and employment in the total manufacturing
sector in 1971 was 15%, 10% and 8%, respectively. Development of the engi-
neering sector is given high priority in the Government's long-term "basic
industrial strategy". This strategy aims at a gradual restructuring of the
economy by linking the pattern of production more closely to domestic
resource availability and local demand. The basic raw material of the
engineering industry, steel, is likely to be made in Tanzania from domestic
iron ore and coal starting in 1980 or thereabouts.
2.        Most of the 55 registered companies operating in the engineering
sector are privately owned but close to half the value of total output of
the sector is accounted for by seven state owned or state controlled companies
and one controlled by a Workers' Development Cooperative. There is no clear
delineation of the respective roles of public and private enterprises. The
perceived uncertainty concerning the future of private enterprise in Tanzania
acts as a brake on the development of private engineering enterprises and
has been identified by the mission as an important policy issue.    Little is
known about and there appear to be no policies for the development of engineer-
ing enterprises in the so-called "informal" sector. Cooperatives, of which
there are very few in this field are encouraged and are eli2ible for govern-
ment support. The number of small-scale engineering firms in the informal
sertor is believed to he a multinle of the offiriallv registered ones. They
provide an important training ground and tend to be efficient producers of
cimnl1 Pnainpr-ina nnnd fAhrirptaed metnl nrodiirtQ nnd renAir sruvir4<s 11.orj
in particular, by lower income groups in towns and in rural areas. The Small
Industries' Dnevelopment Orvqni 7tion'n  (SInO) nrnoram fnr ruiral mechanizatio n
and small industrial estates could provide a good basis for spreading indus-
trial skills but the need for effiriepnov  ncPntives and rhpr'kQ shnouled be
given greater emphasis.
3.        Some exports of locally manufactured engineering products to neigh-
boring African countries haye davelopeA in recent years but their total value
is still only about $3 million (1973) or 1% of total commodity exports. The
main products are r2adios,- dry ba tteries, and ami nnm circles and sheets.
Razor blades, welded steel pipes, fabricated aluminum products and a range
of other engineering products have also beenexported in small quantties
from time to time.   The potential for export growth is probably greater than
4iA4cat-ed by recent export performa.nce.  There are no ------- 4 i.cni v-s;.
public sector engineering enterprises (with the exception of one that was
recently takena   .. tover from  priv-ate. secto%r) are not exp.orJt orienteU anu
most private sector enterprises tend to hold back on expansion for a variety
otf reasons.



ANNEX III
Dage 2
'4         lL1though the potentidal fLUor export growth sh' o uL du not b)e ignored,
the main thrust for the development of the engineering sector in the immediate-
and muediumi-term future will have to come from further import substitution
which as a strategy has become more attractive in light of the Government's
plan for local steel manufacturing. The mission supports the engineering
industry projects that are currently being prepared by the National Develop-
ment Corporation, in particular, the proposed scrap melting and billet casting
furnace, the proposed machine tool plant and the expansion of farm implement
manufacturing capacity. Tne mission identified a number of new project
possibilities where the scope for import substitution is still considerable
and where from a technical point of view local manufacture is believed to
be within Tanzania's capability. Particular emphasis is placed on truck,
bus and trailer body manufacturing. A strategy, starting with CKD vehicle
assembly and leading eventually to the local manufacture of all heavy vehicle
bodies and other major components is recommended. The export potential of
this industry is believed to be good. The same applies to the local manu-
facturing of railway freight cars.
5.        The mission estimates that total domestic demand for primary steel
products that could be made by a local mill is unlikely to exceed 170,000
tons by 1979 but is more likely to be around 130,000 tons, even if an
aggressive import substitution policy is pursued.
6.        Frequent raw material supply disruption and acute shortages of
managerial and many engineering skills have been identified as the main
operational problems facing established industries. Supply problems could
be reduced through the expansion of the storage facilities of the National
Steel Corporation, by improving the information flow between this Corporation,
the Agricultural and Industrial Supplies Company and their customers or by
giving individual firms greater freedom to import their own requirements.
7.        The local capacity to design tools and machines or to adapt imported
technologies to local requirements is still very limited. An ambitious tech-
nical education program has been launched, including the establishment in
1973 of an Engineering Faculty at the University of Dar es Salaam. If suc-
cessfully implemented this strategy should assure an adequate supply of
skilled engineering workers and hligher level technicians from about 1981.
In the meantime, management and technical skill shortages are bound to remain
pervasive and dependence on expatriates and imported technologies will continue.
The mission suggests that renewed emphasis is given to on-the-job training
programs organized by individual firms or groups of firms. The Government
might consider allowing firms to set-off the cost of such programs against
the 10% expatriate employment tax. Particular encouragement needs to be
given to the training of production and marketing managers to improve
productivity and export-orientation. Better use could be made of the
management training facilities of the National Institute of Productivity.



ANNEY TTT
Page 3
Coverage
8.        The engineering and metal fabricating industries described and
revoiwed in t-ii  report ar bradly tho-se AdfineA urAndr the International
Standard Industrial classifications as:
-    Fabricated Metal Products
h Machinery (other than electric)
-    Electrical Machinery, Apparatus, Appliances and Supplies
-    Transport Equipmen...
.LLe foL'LoaLLng products are groupedU unduer these hIeadUiLngs:
T LI T C'
|  L x,
s30 l ariUcatedU rietal Lrouucts
3811 -    Cutlery, hand tools, general hardware
3812 -    Furniture and fixtures primarily of metal
3813 -    Structural metal products e.g. window frames
3819 -    Other fabricated metal products, such as nails,
nuts, bolts, cooking utensils, tin containers,
metal stampings.
382  Machinery (Other than Electric)
3821 -    Engines and Turbines for Machinery
3822 -    Agricultural machinery and equipment
3823 -    Metal and wood working machinery
3824 -    Special industrial machinery e.g. mining, textiles
3825 -    Office, computing and accounting machinery
3829 -    Other mechanical machinery such as pumps, compressors,
repair of machinery.
383 Electrical Machinery, Apparatus, Appliance & Supplies
3831 -    Electrical industrial machinery and apparatus
3832 -    Radio, television and communication equipment
3833 -    Electrical appliances and housewares
3839 -    Other electrical appliances such as dry batteries,
electrical appliance accessories, electric lamps
384  Transport Equipment
3841 -    Ship building and repairing
3842 -    Railroad equipment
3843 -    Motor vehicles
3844 -    Motorcycles and bicycles
3845 -    Aircraft
3849 -    Transport equipment not classified elsewhere
such as wheelbarrows, and baby carriages.



ANNEX III
Page 4
ISIC 385 (The Manufacture of professional, scientific measuring equipment),
which generally are summarised under the heading 'Engineering Industries! are
not considered in this report because domestic production in Tanzania is
unlikely to be economically viable in the foreseeable future. There are at
present no manufacturing facilities within Tanzania.
Organization of this Annex
9.        This Annex is divided into three chapters.   The first one describes
and evaluates the present state of engineering industries in Tanzania. The
mission was unable to gather any systematic information on small scale engi-
neering industries in the so-called "informal" sector not covered by the
census of industrial production. The analysis of existing industries is
therefore essentially limited to registered companies with ten or more
employees. Chapter II suggests project priorities for development of the
subsector and Chapter III analyses the potential growth of domestic demand
for primary steel over the next five years.



ANNEX III
Page 5
CHAPTER I:   PRESENT STAlUS, STRUiCTURE AND EFFICIENCY
Past Growth Trends
10.       Gross output of the engineering sector has been growing very rapidly
(25 percent per annum from 1966-1971). Its share in total output by all manu-
facturing industries increased from 7.7 percent in 1966 to 15 percent in 1971.
Its share in total value added, however, has remained fairly constant (between
9 and 10 percent) which suggests that most of the recent growth in the engi-
neering sector has taken place in industries where the value added is modest
in relation to the value of sales. As shown in table 1 (statistical appendix)
the most rapid output growth has taken place in ISIC 384 which comprises mostly
bus and truck assembly works as well as vehicle repair shops. Table 2 shows
the growth of value added for the same groups of industries.
11.       Employment within the engineering sector has been growing rapidly.
In 1971 it stood at 4,310, which was 92 percent above the 1966 level. By
comparison employment within the manufacturing sector as a whole currently
stands at 53,516 and the growth over the same period was only 62 percent.
Whilst employment has been increasing at a rate of 14 percent per annum in the
engineering sector, total labor costs have been increasing at only 16 percent
over the same period. Therefore, up to 1971 real wage increases were not
significant. Since that year, however, there have been several significant
increases in minimum wages. An analysis of growth trends for both employment
and labor costs in each subsector of engineering is shown in tables 3 and 4.
12.       Gross investment in engineering and basic metal industries has shown
a rather erratic pattern but the indications are that it has been growing
faster than investment in the manufacturing sector as a whole; as shown in
Table 5. The most important new investments that have been made in recent
years are in a new 30,000 t.p.a. caDacitv (three shift) steel rolling mill
in Tanga (completed early 1971), the continuous expansion of steel and
aluminum rolling- rutting and galvanizing farilities of Alilminuim Africa TLtA
in Dar es Salaam, a Philips radio assembly plant in Arusha, a National radio
assembly n1ant in TDar Ps Salaam; the expansion of Qeveral tracrtor   tril-ck and
bus assembly plants (mostly in Dar es Salaam), and a new farm implements
factorv in nar es Salaam-
13.       Table 6 Aindctes that nt    imprtnn s of xbn4na=Dr4ng products have been
growing about 21 percent in average per annum during 1969-73 and in those
years re-resented between 36 percent and 45 percent of the value- of total
-  r                    LI        *  T
commodity imports. Mechanical machinery and transport equipment comprise
the bulk (about 70 percent) of engineering product imports.     Imports of
engineering products from East African Community partners (particularly Kenya)
-are very, 14itd 4  ..e reprsen    abo- u-t 1 -ecn  of -h -oa --   C   -1-an cons'ist
~~  ~~   m   -_s.  .  -   ..j .-  S----L.L   I  pCI. ....LL~ I.  5)   LhlL~ k_V.CLJ .L  CILLU  JL.~L
mostly of metal cases, drums, boxes, insulated wire cables, batteries, cells
for Ltorcilles anAu transiLstors, anAu crowr corks.



ANNEX III
Page 6
Size and Location of Industries
14.       According to the 1971 Survey of Industrial Production (which was the
most recent survey available to the mission) there were in that year 55 estab-
lishments in the engineering sector with ten or more employees. Together
these employ 3,810 people. Their size distribution (as measured by employment)
is shown in Table 7. Fabricated metal products dominate the subsector both
in terms of the number of establishments (40 percent of the total) and number
employed (52 percent of the total).
15.       Employment in the subsector is heavily concentrated in Dar es Salaam
with over 80 percent of the workers. The regional distribution of engineering
industries and employment in such establishments are presented in Table 8.
Company Structure and Ownership
16.       Only 7 of the 55 engineering industries covered by the 1971 Survey
of Industrial Production are Government owned or controlled. One is 60 percent
owned by a Workers' Development Cooperative.    These eight companies together
emDlov about 45 Dercent of the total work force.    In 1973 the Government
acquired a majority interest (60 percent) in what was the largest remaining
private company in the subsector, Aluminum Africa Ltd. This comDanv is in
fact one of the larger manufacturing establishments in the country, employing
650 neonle (1974). There is no clear delineation of orivate and public
enterprise roles. Hence there is much uncertainty in the remaining private
Pneineerina industries which acts as a nowerfiil disincentive for investment
and growth.  All major new projects in the subsector are public sector projects.
The nnlu krnnwn excpntion tn this is a new Sh 14 millinn ecar hatterv factory
planned to be established in Dar es Salaam by 1976 by a private Japanese/
Tanzanian combhination.  T,n cni p nf t-he manyv unrcertai-nties fnrea by nrlvare
industries, a few are still expanding through the reinvestment of profits
that could otherwise not be transferred to foreign shareholders becaueA nf
dividend transfer restrictions. An important example of such private invest-
ment in the sub-sector is the rapid exnansion of Aluminum Africa Ltd.A sinc
1967 and especially since 1971.
17.       The five largest (in terms of employment) remaining private engi-
neering esta-lishments i-n Tanzania aeaadio- asse,.blv and dAry bsttry
factory in Dar es Salaam (currently employing about 600), a metal furniture
factory in Dlar es Salaam lem.ploying E3J25), a ralio asse,m.bly plant in A ushiUa
(employing 150), a farm trailer and water tank factory in Dar es Salaam
(e[ploying 150i)I , adiU a truck'. andu bus bIodUy, r.eta1L furniLture andU electroplating
factory in Dar es Salaam (employing 120).
18.       To promote small industry development, the Government established
(in 1973) a new parastatal organization, the Small Industries Development
Organization (SIDO). SIDO gives overall direction to the Government's rural
industrialization program and provides technical assistance to (would be)
small-scale enterprises, especially those that are organized on a cooperative



AXThTt'V TTT
Page 7
basis. SIDO has an ambitious program for the establishment of a large number
of rural industries, including some in the metal engineering sector.    One of
the main problems in executing this program is expected to be the introduction
and maintenance of adequate efficiency standards and incentives. SIDO's program
for small industrial estates in selected urban and semi-urban areas appears
to be well conceived and should be promoted as a powerful venicle for the
spreading of industrial skills. One constraint to small industry development
appears to be the Government's (and therefore SIDO's) strong preference for
cooperatives as opposed to individual entrepreneurs. Only a few enterprises
have been established under SIDO sponsorship so far.
The Informal Sector
19.       As mentioned, Tanzania's annual surveys of industrial production
include manufacturing establishments employing ten or more. Very little
information is available on the very small enterprises (employment below ten)
and the self employed. However, in Tanzania, like in many other developing
countries, there are many very small enterprises, including a substantial
number operating in the engineering sector. They produce a great variety of
goods and services mainly used in rural areas and by the lower income groups
in urban areas. Because such very small enterprises often operate outside
the formal framework of Government regulations, taxes, minimum wages, and
license requirements, they belong to what is now in the literature on economic
development frequently referred to as the "informal sector".
20.       According to a survey by Schadler (1968) 1/ the number of very small
enterprises engaged in engineering and metal fabricating in Tanzania is almost
three times as high (147 in 1968) as the number of such enterprises employing
ten or more and operating in the formal sector. Many of the 147 very small
engineering and metal fabricating firms identified by Schadler are one-man
operations. Total employment provided by these industries, however. still
amounts to 537, or almost 15 percent of total employment in the formal
engineerin2 sector in 1971. See Table 9.
21.       The goods and services produced by the very small enterDrises in
the informal sector are generally of the same kind as those produced in the
formal sectnr but they are usually less sonhisticated; less well finished,
and much lower priced. They include pots, pails, pans, stoves, oil lamps,
all snrts of tonnklng utensils; metal furnituiire- autn and bicyele renair
services, panel beating services, water repair services, etc. Frequently
the raw material used is scrap metal for which there is no alternative use.
From an economic efficiency point of view the very small metal transforming
enterprises are often better performers than thD lurcovr mnArt--enintlpnt
enterprises in the formal sector. It is not known whether the number of such
very small enterprises operating   n the infrma1 aetv 4n Tan7ania is
',/  f. c. l,aller, lrafts, SmLall Scale Tndlustriles andA I stnAU-1al EducatCihon
in Tanzania, GFO Institute, Munich, 1968.



ANNRY TIT
Page 8
increasing or decreasing. The Government does not encourage private enter-
pri£se.  L1e em..phasis lis placed onA evelopm.ent t Lhrough cooperati ves of which
there are very few in this field. The mission suggests that for the promotion
oLf rapLUd developm1ent ofI riLetal usLng in.dustries  t L. LiLMPJL Lt.aJ1L# 'J LV LtLoUreo.Lnze
the economic contributions made by this sector, and (b) to create an environment
in whILLchi i  is e LouragedU rather than discouraged.
Fabricated Metal Prouucts
22.       This sector is dominated by three companies (Pairay Ltd, Ubungo
Farm Implements Ltd, and Metal Box Company Ltd.) who together employ about
50 percent of tne workers in (formal sector) metal faDricating firms (22 in
1971). The three companies mentioned produce metal furniture and fixtures
for offices, hospitals and schools, agricuiturai impiements (principally noes,
ploughs and panga's), and tin containers respectively. Although rapid pro-
gress has been made in the local production of tnese and otner fabricated
metal goods (including wire products, nails, fences, metal holloware and light
structural metal products such as windows and door frames), the potential for
further import subsidation for many of these products remains considerable,
as is evident from the import analysis in Chapter II.
Mechanical Machinery and Equipment
23.       This industry consists mostly of repair shops for industrial machinery
and vehicles and is geographically more dispersed than any of the other engi-
neering industries. Only a minor part of the total production effort is
related to the actual manufacture of tools, spare parts, or machinery. The
largest company in this field is National Engineering Company, Ltd. in Dar
es Salaam which company employs 275 (1974) and is 60 percent owned by a
Workers' Development Cooperative. It is at present the only company in
Tanzania with a foundry unit. An indication of what can be achieved in the
field of machine tool making is provided by a small private company in Tanga
(Akberali Hassanali & Sons, employing 44) producing a range of good quality
timber cutting and special purpose sisal processing machinery. This is at
present the only company in Tanzania which actually designs and builds
industrial machinery of some sophistication. The National D)evelopment
Corporation is planning to establish a subsidiary company for the manufacture
of industrial tools and machines as will be discussed in Chapter II.
Electrical Appliances
24.       This industry is dominated by two private firms (Philips Electronics,
Ltd. in Arusha and Matsushita Electric Company, Ltd. in Dar es Salaam) who
together employ 736 (1974). The Philips radio and gramophone assembly plant
was established in Arusha following the so-called "Kampala Agreement" (1964)
between the Presidents of Kenya, Uganda and Tanzania which allocated a number
of industries among the three countries to reduce imbalance in the level of
industrial development between them and to reap the benefits of production



ANNEXY TTT
Page 9
on a larger scale for the East African Community as a whole). 1/ Arusha is
centra'lly 'located in the 'ast Afr4can Market.  Exports of raof o and gramophone
from Tanzania to its EAC partners has fallen or stagnated in recent years after
they also establ'ished 'loca'l productior. capacity -
25.       mne douiest'Lc [ILar'dLet fLor raduios ar.d gra.,ophones hLlas groL'W.Vn very rapidly
and so has local production. A second radio assembly plant was established
in Dar es Salaam (1970; employm-nent approaching 600 in 1974) which also manu-
factures a number of component parts as well as dry batteries. Tanzania is
now by and large self-sufficient in radios and gramophones.    About half the
total battery production is exported, mostly to Kenya and Uganda. Most
other electrical machinery and apparatus, including electric motors, swiitch-
gear, household appliances, etc. continue to be imported. Some possibilities
for import substitution are considered economically feasible (see Chapter II).
Transport Equipment
26.       This rapidly growing industry comprises the assembly of semi-knocked
down trucks and tractors, and the manufacture of steel bus and truck bodies.
The assembly of bicycles (by the National Bicycles Company, Ltd, an NDC sub-
sidiary) 'is expected to commence in 1975. Nearly the entire labor force (975
in 1971) in this industry is concentrated in Dar es Salaam. From an economic
point of view the manufacture of bus, truck and trailer bodies is the most
interesting activity in the industry because of the high domestic value-added
component in the value output. This industrial activity is currently dominated
by two private firms (Burns and Blane, Ltd. and Kattar Singh and Hari Singh,
Ltd.). There is good economic potential for a significant expansion of the
vehicle body building industry for the local market and probably exports
as well.
Basic Mletal Products
27.        Although basic metal industries are not normally classified as
engineering industries, they have been included in this survey to give a more
comprehensive picture of the metal using industries. There are only two
companies of significance in the basic metal products sector. The first is
Tanga Steel Rolling Mills, Ltd. (80% owned by NDC) which produces from imported
billets a limited range of steel angles, flats and round bars, and concrete
reinforcing bars. The factory was commissioned in 1971 and output is currently
running at 10,000 t.p.a., nearly half of which is concrete reinforcing bars.
The second company, Aluminum Africa Ltd, was established in the early 60's
as a member of the Chandaria group. The company has grown very rapidly both
through backward integration and through broadening its line of products.
In 1973 the Government acquired a 60% interest in the company. Compensation
payments will be used to finance a further significant expansion program,
the details of which are being worked out jointly by the Government and the
1/   The General Tire factory (NDC subsidiary) was situated in Arusha for
the same reason.



ANNEX III
Page 10
company. Current output of the rolling mills is 5,000 t.p.a. for aluminum and
16,000 t.p.a. for steel. The principal products are galvanized corrugated
sheets, welded steel pipes and aluminum circles and sheets. Over 40% of the
aluminum products are exported to neighboring countries in East Africa (mostly
to other members of the Chandaria group). Welded steel pipes have also been
exported.
Capacity Utilization
28.       No systematic data is available on the degree of capacity utiliza-
tion in the engineering and basic metal industries sub-sector. The impression
gained by the mission is that there is much scope for increasing production
through improved capacity utilization. With the exception of three companies
(Matsushita Electric Company Ltd., Ubungo Farm Implements Ltd.. and Aluminium
Africa Ltd.) all factories in the sub-sector are working two shifts or less.
A large maiority work only one shift.   Overall capacitv utilization in t-he
subsector is estimated at 35-50 percent of what might be achieved under ideal
circumstances.
29        The under-utilization of available machine caDacitv is due to a
variety of factors including an overall shortage of managerial personnel and
skilled workers, supplv disruptions and a narrow domeqtir market. The
"narrowness" of the market, however, is a rather flexible concept. For
many engineering nroducts the notential for imnort siuhqt-itu-it-ion has by no
means been exhausted and the size of the market is to some extent a function
of Government nrocnroment nplirv    For inQtnnro.  inat-elA nf imnnrr4no wffho%le
buses and trucks, the Government and its agencies could insist on the local
manuifariire of those nprts that cn" ae mAde eff4icint l-
The Efficrienr  of T.Lro1 Produclttfion
30.       An analysis of the inputs into the engineering industries covered
by the 1971 Survey of Industrial Production reveals the following rough
structure of production costs-:



ANNEX III
Page 11
Overheads
and Selling
Materials      Labor Costs            Costs
…- percent --------------------
Fabricated metal
products                   58              14                   28
Mechanical machinery
and equinment              41              23                   36
Fl rtriral annaratus
~~~~1        - -  -_  - --
and equipment              72               8                   20
Transport equipment          47                8                  45
31.       Although the breakdown of costs for individual commodities within
these four cateaories mnayc be different frnm tho averages, the nvailahlp
information suggests that - given the composition of production in 1971 -
the domestic value added compo.ent in m.et.. fa.ricating and ln the prndic-
tion of mechanical machinery is probably much greater than in the assembly
of radios and transport equipmer.t which e  o activities make up the bulk
of the value of output in the electrical apparatus and transport equipment
ir.dustr4e.  T.he principal -raw 44,1~ m-a-4 l1,A r uebyt  fo,ur girioup  of indusi-
**LLLO  -  A  * Lf~  jJ  - t*-- I           -LC*--FI-A-      -
tries (steel and aluminum) have to be imported (at least for the time being).
T.he types of skills required and the wages paid for these sk"1ll  do not
differ a great deal between the four grups of industries. Assuming a well-
trained andU Udisciplined laLbor florce as weLjl as com,petent management , the
share of wage costs in total production costs therefore provides some
measure ofL thLe econor,ies that r.ay be achieved thIrough  mport subLstitution.L
32.       The miss'on has not been able to [IIdake a thorough analysis ofL the
efficiency of local production (as compared to imports) for each of the wide
variety of products manufactured in the engineer'ng and basic metal indus-
tries. A detailed comparative efficiency analysis would be very complicated
and in practice virtually impossible because: (a) raw material prices have
been highly unstable in recent years; (b) some Tanzanian parastatal enter-
prises have been able to procure sizeable tonnages of steei from China and
the USSR at lower than world market prices whereas other industries have
not; and (c) the variety in kind and quality of products and services produced
by the engineering industries is great, close substitutes are often not avail-
able and border prices are difficult to establish.
For reasons indicated in the preceding paragraph, the mission can
do little more than draw some "impressionistic" conclusions about the effi-
ciency of domestic engineering and basic metal industries. Tihe Tanga steel
rolling mill has so far not been an efficient producer mainly because: (a)
the factory works on a one shift basis only; (b) large quantities of scrap
generated have not been re-used, pending the completion of a scrap-melting



ANNEX III
Page 12
furnace project which is now under consideration. The mill's problems are
aggravated by supply problems. It requires 80 mm. billets of which there
are only few suppliers. It had to close down for three months in 1973 for
lack of raw material.
34.       The efficiency of the only other basic metal industry in the country,
Aluminum Africa Ltd., compares favorably with similar establishments else-
where. The company has an established export market in neighboring countries
for aluminum sheets and circles. Welded steel pipes have also been exported.
35.       Most engineering products attract an import duty of 20 to 30 percent.
Ex-factory prices of locally fabricated metal products such as metal furniture,
metal containers, aluminum and enameled holloware, pressure stoves, nails
and other wire products generally compare favorably with imports of comparable
quality. Most of the firms in this industry are reasonably efficient small-
scale private enterprises that were established during the 50's and early 60's
when protection against foreign competition was lower than it is at nresent.
Some of their products are regularly exported to Kenya.     The two radio assembly
plants also produce at ex-factory prices at or below imnort alternativpqe
One company competes successfully on the Kenyan market with a local manu-
facturer in that country.   Radio and zramonhone assemhlv nnprationns ar
technically efficient but the economic contribution made by these industries
could be increased through the gradual intrndiiu-t-inr nf donmetic cmponent
manufacturing including initially casing and packing material.     One of the
two factories has, alrpeav made a nniimhr of imprtant stesn in that- directio
36.       The farm implements facto- yiD4ar n  es Salaamhas been. plagued by-
many problems since it began operations in 1970.    The company has not been
an effiricnt nrnAiodcer as far, mn4 ,1- because of circums.tan%ies bed. --3 -o--d -. -
ment control. Its main problems have been overstocking of imported hoes
and ploughs by the former State Trading Corp oratio     factory layout problem-s
due to original design errors and raw material (steel) supply disruptions.
There is m.uc. scope for proAuctivity improvement, however, and' there is no
inherent reason why the factory could not become an efficient producer after
r en,avnl  f t-n- n ic a 1 ottl1enecks.
q7 r*fr -  -          I- us  an L .OUL ra
37.       The truck, bus and trailer body building industry is efficient
but very small at present in relation to its potential. In view of the
important differential '1in trandporlL Costs between raw steel and built-up
bodies, the labor intensity and relative simplicity of the manufacturing
process and the Lfact thLat small scale production units can be quite efti-
cient, the freight body industry should be able to make a significant
contribution LU the development of the engineering sector.     Current ex-
factory prices for locally built bodies are about 30 percent below c.i.f.
im.port prices and are comparable to those prevailing In Kenya.    Even though
the finishing is usually inferior to European standards (weld and grind
marks clearly showing beneath the paint) the bodies are built very strongly
and appear to be well suited to Tanzanian conditions.



ANNEX III
Page 13
Supply Problems
38.       Raw materials used by the engineering industries are supplied by
the two rolling mills, the National Steel Corporation which is a stockholder.
or are directly imported by the user.    In the latter case this is usually
special steels such as tinplate for cans, steel for hoes, billets for rolling,
aluminum ingots, etc.   Merchant bars and standard sections are usually im-
ported by. the National Steel Corporation. Supply problems are pervasive.
They are ,caused by the current world shortage of steel and by domestic
problems. including delays caused by comprehensive import licensing, delays
in the port, and lack of procurement experience. (Construction materials
imported for East African Community Corporation proiects. the Tan-Zam railway
and Kidatu hydro-electric project are exempt from import licensing require-
ments.) Supply problems lead to excessive stocking by some firms and
temporary shortages by others.
39.        Import supply problems could be reduced somewhat through the re-
rvc1ina nf domatrinllv aenerated sct-rap metal.   It is etimate-A that som
6,000 to 7,000 tons of recoverable steel scarp is being generated every
year   Mnot ied to be exnorted but thae Goverrment imnnros     a scar, expo-r
ban in 1971.   Since that time much scrap has accumulated (estimated at some
20,000 tons) but none of it has been used so far an a       oft 4"I     losti
value through oxidization. There is clearly a need for one or more steel
S crapn m-lt -4 fu naces.
-    I     One .  1.Lc t ecxlm Lin ttle | Uol U.3 LL s  UtLL.JIu Vi L f  ee  M-'LLIUUL c ts .-..U. L ,
supply-disruptions to building contractors and engineering industries is the
verj lim..ited capacL.Ly o'f the stockL yardul ofL thLe iN1lational Steel Corporation.
This yard-holds at present a maximum of 7,000 tons which is a fraction of
require,,,ents. * .e expans'Lon of yardU capaciLty should b Ve given high priorit-y.
Another problem is the lack of a stock list catalogue for industrial machines
and tools-, such as drills, taps, milling outlets, etc., held by the state-
owned Agricultural and Industrial Supplies Company, Ltd. This company has
a confiner,,ent Lor the 'import of suchi goods and is th'e principal stockist in
the country. Publication of a periodically updated list would improve commu-
nications between the supplier and its customers especially outside Dar es
Salaam.
41.       .There appears to be a great shortage of precision measuring
instruments and metallurgical testing equipment, such as hardness and
tensile testing instruments, in the country both in the factories and in
the technical schools.. The availabiiity and use of such instruments for
the control of heat treatment operations and dimensional limits is required
for high speed machinery, spare parts, drive shafts, etc. In this context
it is of interest to mention that the Ministry for Commerce and Industry is
preparing,for the establishment of 'a National Institute ot Standards. As
far as the engineering' industry is concerned this is an important step in
the right"direction aimed at raising quality standards which should facil-
itate exports at a later stage.



ANNEX III
Page 14
Labor and Management Constraints
42.        The shortage of skilled artisans of almost every description is
probably the single most important constraint to achieving rapid expansion
of the engineering sector. The problem has been aggravated by the departure
in recent years of many skilled residents and citizens of Asian extraction.
On the management side the picture is very similar. There is an acute
shortage of experienced Tanzanian managers with a technical background in
the engineering industry. Domestic engineering design capability is still
very limited. Until such time that this capability increased. Tanzania will
continue to depend on imported technology.
Training and Technical Education
43.       Most training of semi-skilled and skilled artisans to date has been
civen on the iob bv enzineerine comDanies themselves. This form of internal
training has in many cases led to very good results and deserves every en-
couragement= The Government might consqider allowing comnanles with well
designed on-the-job training programs to set off the cost of such programs
ngainct thp 10 nperent expatriate levv Innreased emnhasis has in recent
years been placed on formal training in specialized schools for technical
edurati on -
44         Skilled workers are trained at the Tndiiutria1 Training Center in
Dar es Salaam. The skills which the Center emphasizes are those of machine
tool operators, carpenters, ni nters   fitters, -nA waelders.  The conurqes are
of the "sandwich" type which means that the trainee spends one year at the
Center taking courses and the follnwi4ng year in4 industry.  Ahout 20 studtents
graduate from the Center each year.   Because demand is very much in excess
of this number, four more similar centers are planned for Arusha, Tanga,
Mwanza, and Ifunda.
45.        Higher level technicians are trained at the Technical College of
DAaRr es Salaa., (TCD) Whi_hf offe-r six-year coursess in .ivil, mAechanicalS
electrical and chemical engineering. Annual intake to TCD varies from
30 0    ton40.  Thile College ter.ds to be somewhat thoeicli   its  proc
~JuvA   LIJ*$AJ *tu   LI&~  LCL&.A  L.   LI  LUCi~I.  &LL=%L =~L _LA. L.a.  .LLI  A_.0 CL F aJpA WJL.AL
and does not place enough emphasis on applied engineering.    Laboratories
anl equipr.ent ar  not adequately main.tained. A secondu technical coL'lege
is to be established in Arusha in 1975. Its capacity would be the same
as TCDis but JLt wou'ld pLace greater eruphasis on pLLact'a  LLtrLLir.g anU
applied engineering. Once both colleges operate at full capacity (prod-
ucinLg between therm- about 600 graduates annually froom 1982), they are
expected to be able to satisfy domestic demand for higher level technicians
- ~- 1  S  -,  1 -  n  I
until tne miado"e ou0s.
46.        Tne University of Dar es Salaam Faculty of Engineering was opened
in 1973.  It offers a four-year undergraduate course, leading to a B.S.C.
(Engineering) in Civil, Mechanical and Electrical Engineering. Tne annual
intake of the Faculty is 120 students (60 civil engineering, 40 mechanical



ANNEX III
Page 15
engineering and 20 electrical engineering). For metal engineering and
chemical engineering, students still have to be referred to universities
abroad.
47.        The Faculty of Engineering curricula places great emphasis on
practical training under supervision in industry. To promote applied
industrial research and the development of intermediate technology, the
Faculty is anxious to maintain close links with industry and with the
Tanzania Agricultural Machinery Testing Unit (TAMTU) in Arusha. A post-
graduate program is not likely to come into existence before the first
under-graduate course has been completed (1977).
48.        After the addition of four new industrial training centers and
one terhnlral rollegpe t-he annuial nrodntiiton of gradities (from 1982) is
expected to be approximately as follows:
(i)  University Engineering Faculty:      100 engineers
(ii)  Technical Colleges (2):              600 higher level technicians
(iii) Industrial Training Centers (5): 1,800 skilled workers
At this level of production, supply is expected to be in line with demand
from 1982 until the middle 80's.
49.        Secondary education is in the pf                           A r .  e
u j  u   -11 ~~  ~ Lll& ~~0O   ~tULU  .CCLLO        110
Ministry of Education is planning to transform the existing general schools
incto four separatCe types, eachA one with  I- b_s in a priuar directlon
.LIIL'  'A±  ~~~L~0  I.y ~0  ,  O..LI'JLL  WI. L    ~ .LO~ .L I  CL   9 L L L.L U.LcI  U.LI  LJJA
(technical, commercial, agricultural or domestic science). There were
_L   U  LWL       U      I IL.  JI .L_L 1  Lt_L_ i_ C_ J U  _ _ JL  :  _
Moshi) offering practical courses in carpentry, welding, machine operation
anrd enrgineering drawing.   ecause of a shortage of funds for the financing
of workshop equipment and qualified teachers, the effect of these courses
o.n the suppLy of techn-Uically trairLeu peopLe Ihas  een limited so far.
Wage6s, ildUUo UosLs anu Lduua rLurUCLoLviLy
50.       The information in Table 10 on wages and labor costs per working
hour (including fringe benefits) is based on data collected by the mission
in Septemrber 19i4, and applies to skilled ractory fioor workers, such as
stamping machine operators, repetitive assemblers, machinists, production
welders, etc.
It is apparent that wage rates per working hour and labor costs
per hour (including fringe benefits) differ significantly from company to
company. No systematic explanation could be found for this. The National
Union of Tanganyika Workers (NUTA) is endeavoring to bring private sector
wages in line with those prevailing in the public sector.



ANNEX III
Page 16
52.        The average labor cost in the engineering industry in Tanzania is
iust nvpr Sh 41-ner hour which is about 17 nercent of the prevailing rate
in the UK for comparable skills in the engineering industry. Observations
of the tempo of working of direct production workers during factory visits
indicated that where the work is machine paced, by conveyer belt or other-
wise, output levels are comparable to TK standards    In most engineering
plants, however, the work tempo was estimated to be around 60 to 70 percent
of average LK levels.
53.        In addition, Tmrany Tanzania enter-rises were found to employ up to
50 or 60 percent more workers than required for efficient operations, while
workl stoppages Aue t supply disruptions and other organizational problem
tend to be much more frequent than in advanced industrialized countries.
Because of differences in technology and capital intensity a direct comparison
of labor productivity between the Tanzanian and U.K. engineering industries
'Ls not possibl'e bUut all indicatio..s point. atL .h'Le great needu and the- scope for
productivity increases.
Exports of Engineering Products
54.        An estimated 5 percent of the output of engineering industries in
Tanzania is currently exported, mLiostly to KenL-ya and ZICU,bia. LL.ere are no
such exports outside Africa. Table 11 shows that the list of export items
includes several small and very smaall item,. In 1973 there were basically
only four products worth mentioning (radios, dry batteries, aluminum circles
and sheets, and metal containers) which together accounted ior over 80 percent
of the total. Of these four, metal containers are not a regular export
product. 1/  Tne two radio assembly plants (one of which also manufactures
batteries) are together responsible for the bulk of all engineering product
exports. The only other important exporter in the field is Aluminium Africa
Ltd. (aluminum circles, sheets and occasionally some steel pipes and galva-
nized corrugated sheets) which company, for all practical purposes, only
exports to members of the Chandaria group in neighboring African countries.
1/   The 1973 exports of metal containers represents the incidental sale of
oi. ULUIdus LU SUUCILL.



ANNEX III
Page 17
CHAPTER II. IDENTIFICATION OF. PRIORITY PROJECTS
The Scope for Further Import Substitution
55.       The engineering sector in Tanzania is still veiy small and the
scope for further expansion based on the domestic market is considerable.
In addition, surplus production for external markets should be economically
feasible for a wider range of engineering products than are currently
exported. A rough picture of the degree of self-sufficiency in the supply
of each of the four major categories of engineering and metal products is
presented below.
(in million of T. Shillings)          Domestic Output
Domestic                     Total Domestic      as % of
Output   Imports   Exports      Supply      Domestic Supply
Basic and fabricated
metal products         152       147      4            295             52%
Machinery other
t-han Plertrier         20       445      1           L6L               L%
Elpertrical machinerv     34       135      10           159             21%/
Transport equipment       97       370      -            467             217
Totals               303     1,0Q7     11                            22Y
This chapt    firt brifly reviewas the proects that are kror to be
either under implementation or under active consideration by the government.
In the second part of this chapter an. att  j. is .o       identi f  addtional
project possibilities. These additional possibilities have been selected on
the bas isof the foloGw-ing cr-iteria:
L,,~~~~~~~~~~~~ ~~~~~~a0,0  ~~~~~~~~~~~~~~~%L LLO   L .X~WL  6~L   LCL
(a)  T.he project fits the Tanzanlan government's overall basic
industrial strategy and there is a strong probability that
Tanzania can prolduce efficiently compared to the 'irmport
alternative;
(b)  Tanzania has or can easily acquire the technical and managerial
skills required for the project;
(c)  The existence of a market in Tanzania or abroad can be readily
demonstrated.



ANNEX III
Page 18
Review of Engineering Sector Projects Under Implementation or Active
Consideration by the Government
57.       A bicycle manufacturing/assembly project which had been under
consideration for almost ten years, is now under implementation by NDC. It
aims at the production of 150,000 bicycles annually from 1976 which is more
than double the current annual level of imports. The project could have
significant riDple effects and support to the growth of domestic component
manufacturing establishments.   In addition it should provide a good training
ground for many simnle engineering skills. Investment in the proiect is
estimated at Sh 43 million.
58.       Probably the most important project currently under consideration
is the exnans{on of the Altuminium Africa Ltd.  In June 1971 the 2overnment
acquired a 60 percent interest in the equity of the company and stipulated
that com.pensataion naymentq woultd  e used for the financing of an as vet
undefined expansion program. Since the company is a well managed efficient
nrnAiiim-r nf anmp nf rhp hacQi .inntwtc into eno4nerinp in dtiqtrtie with an
established and rapidly expanding market in Tanzania and neighboring countries,
implementatio-n  f t-h4is rnneit hv NnrC shnuld, in the o4nin4on of thhe mission,
be given high priority.
59.       Another important project is the establishment of a steel scrap
melting and billet c ating facility in Tanga.    A femas4i414-ity astudAy for a
Sh 14 million 10 t.p.d. electric furnace has been prepared but project imple-
ent-ation.. hn been Ad1eyeA for unkno-. reasons. Meam.hile,     large quarntity
of steel scrap has accumulated at the site of the Tanga rolling mill since
t,h    ,.ne goverm.e.t *M..oSeA a scrap export ban.  Ir view of the r n4 11 ' great
vulnerability to import supply disruptions establishment of the furnace
Lsho0uIt b21e re gardluedl a Lhi8h - IZ- pr io-Writ I pro,ect. -   A larger size furr.ac   Aol
JL#U   U LJ  ~~UU   L.61 J~iL..Ly FL-J=CLL. .         aA.~&B 
probably be somewhat more efficient (an 18.000 t.p.a. (or 50 t.p.d.)) but
Tanzan,La would thlen becor.e 1.MpOrt UAdependnL1t for mrJst of its scrap require
ments which may well create another serious supply problem. The volatility
oLf scrIp prILces on thie 'LnternatLior.a'l U-aarklet and the unreLiabi.Lity of suppjLy
are notorious. A Sh 17 million, 18,000 t.p.a. furnace is reported to be
under consideration as part ol te expansiLon pLan fLor                   td.
The estabolisament oi a new stock yara ovi the NatIorLU4J   SLee.L
Corporation is understood to be under consideration but the timing of imple-
mentation is uncertain. If the government insists on centralizing tae import
and domestic wholesale function for a wide range of metal products and tools
used by the engineering industry in the hands of NSC this relatively smali
project should indeed be given high priority. It may be expected to yield
a high return in terms of fewer supply disruptions to domestic industries.
61L.       NDC is currently preparing a project for the establishment of a
machine tool plant for the manufacturing of a wide range of metal and wood
working machinery, pumps and compressors. No details have been announced so
far. Little thought appears to have been given to the possibility of making



ANNEX III
Page 19
use of the experience and skills available in the only existing machine tool
factory in the country (Akberali Hassanali and Sons in Tanga) which has been
successful for many years at designing and building cross cut saws, circular
saw roller benders, break down machines for saw mills and other woodworking
machinery. The promotion of a domestic tool and machine making industry
understandably has been given high priority by the government as an essential
element of its basic industry strategy. The main problem here is that the
range of industrial machines for which the domestic market is large enough
to sustain production at an economically acceptable level is undoubtedly narrow.
Most specialized industrial machinery requirements will have to be imported.
The renair and maintenance function. however, can and should be localized as
soon as possible.
62.       The de-bottlenecking cum expansion project for the Ubungo Farm
Tmnlpments fatonrv in nar es Salaam i iS aimnpe and inpitnpneive nroi4ct of
high priority. Implementation of this project has recently begun but it
chnould hnve hbon cnmnplteAd yars naon   The fantnov ryirrantlv wrrkc nt nnlv
30 percent of capacity but even at full capacity it would only be able to
satiscfy half o f Tat, ,.t,4ia 's na annual I reureets of hand hoes (2 milio4n)~ andA
animal drawn ploughs.   A second farm implements factory is planned for Mbeya
but no details have been announced.
New Project -Pos-sibilities.
63         A^ a first step to the identification of s    4      project possibil-
ities to achieve more rapid growth within the engineering sector, a detailed
analys's was ma,de of all relevant -imports from, 1969~I-197 (see 'Table 1)
64.  ~ ~   ~   A   LJL  L…            -L L   --   1 1
Decause of fluctuationI fLoI.L. one yeaL rL  LIL LnxAL, tLLI aVeLra   Va.LUe
of imports during the last three years for which external trade statistics
were available (1971-1973) was used for the construction of a table showing
imported engineering products in descending order of value (see Table 13).
This table provdUes a bDasis for identifying key areas for 'mport substitution.
65.       Tne three digits SITC classifications listed in Table 13 were then
further broken down to pin-point the key products within each classification.
These key products were examined in the light of Tanzania's skill and raw
material position which led to the compilation of a list of products worthy
or closer examination by Tanzania's planning authorities.     The products listea
are all relatively simple products for which the technology is already avail-
able within the country or can readily be imported. Tne size of the domestic
market is considered sufficient to sustain production on an economic scale.
Products Eligible in Principle for Import Substitution
66.        In the "fabricated metal products" sector the manufacture of locks,
padlocks, hinges and catches should be technically quite feasible and econom-
ically justified. This would also help in building up a small press tool
making industry. The manufacture of a range of finished structural parts of



ANNNLX III
Page 20
steel and cast iron foundry products such as manhole covers, pipes and all
sorts of fittings should also be considered. Practically all tabricated metal
parts on trucks and buses such as exhaust pipes, silencer systems, brackets,
radiators, springs and steel pressed pulleys can be made locally, initially
perhaps mainly for the replacement market. There is no reason why Tanzania
could not be self sufficient in metal household buckets and similar containers.
67.       With regard to "machinery other than electric" the local manufacture
of a range of pumps for liquids and pipe fittings for water supply systems
should be well within the capability of the National Engineering Company to
undertake as an expansion project. The manufacture of transmission shafts,
cranks and pulleys should also be considered a possibility. The same applies
to simple construction and loading machinery such as wheelbarrows, concrete
mixers and conveyors. The local manufacture of small internal combustion
engines and spare parts for static operation (e.g. for spray units, compressors
and electricity generation) could provide a basis for the manufacture of motor
cycles later on.
68.       In the "electrical sector" an obvious possibility is the local manu-
facture of motor vehicle batteries. It is understood that a private sector
enterprise is already undertaking such a project. It should certainly also be
possible to start the local manufacture of small electric motors (sizes and
types to be determined by a detailed market survey).
69.       With regard to "transport equipment" the local manufacture of all
truck, bus and trailer bodies (instead of importing fully assembled units)
should be the ultimate aim of a strategy that would start with the c.k.d.
assembly of all such vehicles. This strategy could make a very major contri-
bution to t-he develonment of the engineerine sector.   It would be based on a
phased program of import substitution of components including the fabricated
metal parts mentioned in naragranh 65=   Another imnortant proiect Dossibility
is the manufacture of railway freight cars, or at least the bodies initially.
The demand i. Ea-at Africa for freight  arsz is likelv to ri4p Rharnlyv nartlv
because of the new railway line from Dar es Salaam to Zambia and the large iron
ar.d steel pro4-c     Ch4ur.y% A4at-vitr-t-.  A nrnip't- for railwav freight r-ar (hody)
manufacture could be linked with the production of heavy finished structural
parms,referred to- in paraoraph 65
Implemtentat-nion of Engin,eering Sec-tor Development Strategy ad Ex -nA  ort Possaii4titc
70        Th.e pblic sector cap-t     fo- ur.dertaking r    proj-ects isl1mited.
Past experience shows that with few exceptions it takes very long indeed to
and that the pace of implementation tends to be rather leisurely.    The engineer-
ing sector iLn a sm-all countLry 'likr-e TLanzaniLa typiLcal'ly consists of -nny relatively
small production units. Small scale production can be quite efficient in the
case of many products.   Product variety is great.   Success or failure of the
individual firm is often a function of its ability to adapt to changing technology



ANNEX III
Page 21
and changing market conditions. Most of the know-how and skills available in
Tanzania's engineering industries are still concentrated in private sector enter-
prises. If the private sector is assigned a clearly defined role, it could make
a sienificant contribution to the rapid development of the engineering sector.
One possible way of achieving this is to discuss a strategy for the development
of the sePrtor with renresentatives of the industry and to work out a mutually
agreed program of expansion and diversification.
71.       As mentioned, current exports of engineering products are very limited
but cnould. hbe epnanded g4vein a nroner inrentive framework and better information
flows. The pervasive uncertainty concerning the future role of the private
sectnr nlsn artc as a hreak on exonrt growth.   There is a ready market for some
of their products in neighboring African countries which is not being exploited
for lack of incentives.  Puhlic cartnr enterprises have sn far ronrentrated on
import substitution. The longer term future export potential could be parti-
cul arly important w.l4th ?.spc  t t r, tbuir.I, h,,i  lnorry anr. neosih1bv nlsn ra4lwav
freight car bodies. Metal furniture appears to be another promising possibility.
For the immediate and medium term future, however, the ma4n thrusct for thp
development of the engineering sector will have to come from further import
substiLtution anAr from tbe development of new products adapted to Tanzanian
requirements.



ANNEX III
Page 22
CHAPTER !II.  THE GROWTH OF MLTAL CONSLum±TION
AND THE DEMAND FOR PRIMARY IRON AND STEEL
Tanzania's Steel Mill Project
72.       Tanzania is planning to build an integrated iron and steel mill
based on domestic iron ore and coal reserves. (For a further discussion of
this import and project and its raw material base refer to Volume II, Annex
II, paragraphs 142-146, and Volume I, Main Report, paragraph 106.) The
government has not so far announced any details on the production technology
or the size of the mill, or the timing of its completion, but it is under-
stood that the target date for first production is 1980 or shortly thereafter.
In view of the great significance of this project for the Tanzanian economy
and its immediate relevance for the development of the engineering sector,
the mission has attempted to make a projection of the likely growth in local
demand for primary steel output by the local mill.
Present Metal Usage
73.       As all metals have to be imported, the most up-to-date information
available on metal usage is contained in the 1973 Annual Trade Report of the
East African Community. A detailed analysis was made of net imports, less
re-exports for iron and steel products under the following categories:
-    iron and steel basic raw materials, such as bar, sheet, tube,
wire, rails;
-    simple semi-finished and finished products such as nails,
finished structural parts, hoes, hand tools;
-    intermediate finished products, such as tanks, buckets, locks,
springs;
-    complex products with import substitution possibilities such as
bicvles, trailers- railway freight cars. machine tools.
The purpose of these particular sub-divisions was to differentiate
between groups of products with different levels of potential import substi-
tItlon  nAZCZ ihiI iHi   The imnnort cv,rxrpv 1g rnntAinpd in Tnhlh 1b
-7 IF.    Tableh1  IL cshoTws that tntal 1Q73 impnorts  f inron ,nA Qteel in thoir
basic raw material state amounted to 149,000 tons.    Of this, about 66,000
tons consisted of rails and sleepers for use in the Tan-Zam railway projert
which leaves about 83,000 tons for other uses.    For projection purposes, the
latter f-igure is believed' to provide a more meanir.gf;:l b-as4s than the total
of 149,000 tons. In addition, a further 55,000 tons of iron and steel products
degree  eligibleelfoproduits that in the opin.on of the 13issmpon are in valyo
degrees eligible for import substitution.   Thus, the 1973 imports total of



ANNEX III
Page 23
iron and steel Droducts relevant for an analysis of demand for the nroducts
of a local steel mill was approximately 138,000 tons. The comparable figure
for 1971 was 121f000 tons and for 1972 it was 157,o00   tonnq
75.       These paragranhs are concerned with the use of orimary iron and
steel products in domestic metal using industries. Projections of future
demand for iron ndA steol in Tanzania ar probably more a function of govern-
ment policies than of historical growth patterns. If the government decides
to give to- priority to the developm-nt of e-ineering and other metal u-s4-
industries, then demand would, of course, grow faster than otherwise. Several
attempts have been .-Ane in recent year-s by tbe govern.ment itsel, an- by
various consultants to project the local demand for iron and steel at various
points in thLe future.  Ava4lable proJections flor e.g. 190V shi*ow very Udifferent
results. The differences are partly due to different estimates of base year
consumption anLU parly to) U"LLCLeren dasuimpLLions dUUUL thet 6LUWLII LdL U Vi LIMl
economy in general and the metal using industries in particular. Because
tota"l steel ir,,ports, thle com,position of0 thlose imiports, ana therefore apparent
steel consumption, show erratic fluctuations from year to year the choice of
a base year is rather cr'tical.   hlle missLon studied steel imports during the
last three years (1971-1973) and concluded that 1973 steel import statistics
proviue probably as gooa a base for projection purposes as any.
76.       In projecting future consumption or iron and steei, the mission used
a consumption growth rate of 6.5 percent per annum. This rate corresponds
closely to the historical growth pattern. Obviously, the growth of future
steel consumption could be higher or lower depending on the investment rate,
the pattern of investment and other factors. As a first step, the mission
assumed no further import substitution which means that the composition of
demand for iron and steel products in 1979 (see Table 15) would remain
unchanged.
77.       Table 15 suggests that total demand in 1979 would be around 200,000
metric tons of which about 120,000 tons would be in the form of primary
materials. The next question to be answered is how much of the remaining
80,000 tons that would otherwise be imported in the form of semi-finished and
finished products could be manufactured in Tanzania from primary materials.
To answer this question the mission first reviewed each of the simple semi-
finished and intermediate-finished products to assess what percentage of
imports could be substituted by 1979 through the growth of output by existing
domestic manufacturers. With regard to the complex products, an assessment
was made for each of the main products included in the relevant part of Table
14 with a view to determining a rough picture of the probable increase in
local demand for primary materials associated with an aggressive drive for
more import substitution. The results of this exercise are shown in Table 16.
78.       Finally, to estimate local demand for primary iron and steel
products in 1979 that could be supplied by a local mill allowance has to be



ANNEX III
ma'ade 'or -he lik1elhihood tha  speciall.y productOs such, as tir,ned Aplate anA
tool steel will not be made in Tanzania for economies of scale reasons.
Al though no plans h'ave b-een announce' 'or rollir,g -ills that wil b1  e llnked-
t-L. L[LUU[  fL   I1V    ~ L  1LLJL  U  UL A.  L  J±L LI 16 ..3 LLL W..J  ~ LII~
to the planned steel plant, it is probably not realistic to expect that the
new and existing rol'ling i-ills togethler will be abUle to supply ,,ore thLan 75
percent of total domestic demand for primary iron and steel materials, or
about 110k,000 tons liquid steel equivalent.  The choice of 1971 as a base
year (instead of 1973) using otherwise the same methodology, would have
yielded a nigher estimate of the projected uomestic dermiand for locally
made steel in 1979, namely about 130,000 tons of liquid steel equivalent.
In addition, it is possible that the local mill would be able to manufacture
rails (probably mainly replacement rails) for East African Railways and
possibly Zambia Railways. Tne annual demand for repiacement rails is
highly erratic but could average around 20,000 t.p.a. during the 1980's
which should be added to the potential demand for locally manufactured
steel.
79.       In view of the many problems and uncertainties associated with
projecting the demand for iron and steel products (including uncertainty
with regard to the rate at which the government is going to build a new
capital at Dodoma) local demand by 1979 for primary products that could
be made by a local mill can be projected within a fairly wide range, say
between 110,000 and 170,000 tons of liquid steel equivalent.



STATISTICAL APPENJDIX TO ANT.EX DI
List of Tables
Table  1      Value of Gross Output (19'66-1M71)
(ln Shs million; current prices)
Table  2      Value Added (1966-19711)
(in Slhs million; current prices)
Table  3      Employment, 1966-1971
Table  4      Labor Cost, 1566-1971
(in Shs million; current prices)
Table  5      Gross Investments, 1°66-1571
(in Shs million; current prices)
Table  6      Imports of Basic Metal and Engineering
Products, 1969-1973 (Shs million; current prices)
Table  7      Size Distribution of Engineering
Establishments, 1971
Table  8      Geographical Distribution of Engineering
Industries and Employment, 1971
Table  5      Very Small Scale Engineering Industries
in Tanzania, 1968
Table 10      hvage Rates and Fringe Benefits in Selected
Engineering Establishments, September 157h
Table 11      Exports of Engineering and Metal Froducts
from Tanzania and Transfers to EAC, 1573
(in Shs million)
Table 12      Imports of Engineering Products
(in Shs million)
Table 13      Imports of Engineering Products in
Descending Order of Value
Table 14      Imports Less Re-Exports for Iron
and Steel onods - Tanzania. 1973
Table 15      Den.nmd fnr Tron and Steel Products that arp
Potentially Eligible for Import Substitution,
1973 aAnd 1070
Table 16      Comporition of Demand for Iron and Steel
Products in 1979 with and without Further
T-port Substitution (n   Metric Tons)






Value of Gross Output (1966-1971)                                        Table 1
(in Shs. million: current prices)
Total Gross Output               I   % Total
ISIC Industrial Sector                                                 Engineering
1966     1968     1969      1970     1971  1 Only 1971
371 Basic metal mId.
372  incl. rolling      l                                       72.3
381 Fabricated metal J
products                                                  79.5        3L-.h
382 iMiachinery (other
than electric)                                            19.9          8.6
1 ',4      2iL.6    29.2 e   42.8a
383 Electrical mach.,
apparatus,         )
appliances                                                 34.1 j       1.8
384 Transport equip.        9.8     31.2    110.9     68.2      97.3        42.2
Total engineering plus
basic metal              99.7    130.5    224.4    212 1     30j.1
Total engineering only                                         230.8      100.0
Total all manuf. ind.    1289.3   1269.0  122.6    1744h.l   2012.9
ang. plus basic as %
of total manuf.           7.7     10.3     14.7     12.1      15.0
Source : Survey of Industrial Production 1966, 1970, 1971



Vya lue A Ad^e d t 1 oo6-l(l)
(in shs. million; current prices)-                                      Table 2
Total Value Added              |   % Total
1966-    1968     1969     1970    1971     Only 1971
371 Basic metal ind.  ,
372  incl. rolling                                          12.4
> 16.9     15.6     20.5     23.6
381 Fabricated metal  )
products                                              22.8       44.4
382 Machinery (other 
than electric)               5                         8.3       16.1
y, 5.8      5.6      7.2     13.4
383 Electrical mach.,
apparatus,        J
appliances                                               4.7        9.1
384 Transport equip.      4.7     11.2     41.0    14.0     15.6 1     30.4
Total eng-ineering plus
basic metal            27.24    32.4     68.7    51.0     63.8
Total enineering only                                       51.4 i    100.0
Total all manuf. ind.   295.2    378.3   L75.L    560.6   .6L2.8
Eng. plus basic as c                                              i
of total manuf.         9.3      8.6     14.5     9.1      9.9
Source:  Survey of Industrial Production, 1966, 1970, 1971



Employment 1966-1971                                                      Table 3
Total No. Employees                   % Total
ISIC Industrial Sector                                                   Engineering
1966      1968     1969      1970     1971  !   Only 1971
171 Basic metal ind.
372  incl. rolling    7                                          500
1,329       928     1.350    1,266      
381 Fabricated metal |                                         1
nrn_iits                                                1.987 12.11
382   t- hinAry (other
than electric)                                             511 |       13.4%
>  463     j,n     563       871
383 Electrical mach.,
annrtil, s 
appliances                                                   337          8.8%
384 Transport equip.       447       539       802      771       975 _      25.7%
Total engineering plus
'      ,,4.,i' P)0               0 1fl7   9 71 C~   9 onYq   V, 1icr
basic ,met-a!          2,23      2,07     271        ,98     4,1
T-otai engineer4i ng only -tr                                  '4 A-i n         n3,8101
Total all manDU. *.nd.  32,972    42,387   43,396    48,3I L  53,516
Eng  plus basic as % .
of total manuf.         6.7%      5.0%     6.3%      6.0%     8.0% |
Source: Survey of Industrial Production 1966, 1968, 1969, 1970, 1971
Note:  This table covers firms with ten or more employees only.      Employment
covers all paid workers of the establishments, operations, admin.,
personnel, supervisory, technical and clerical. Excluded are
working proprietors and unpaid family workers.



Labor Cost 1966-1971                          tl !.
(in Shs. million; current prices)                                     abule 4
Total Labor Costs                   % Total
ISIC Industrial Sector                                               Engineering
1966     1968     1969     1970     1971 i   Only 1971
371 Basic metal ind.
372  incl. rolling     )                                      3.2
t  8.9      n.a.     8.0      7.6
381 Fabricated metal
products                                               11.3        42.0%
382 IIachinery (other
than electric)                                          14.8        17.5%
383 Electrical mach.,     2.9     n.a.      3.9      6.8
apparatus,         )
appliances                                                2.7        10.0%
38L Transoort equiD.      2.L     n.a.      6.4      6.2      8.1        30.2%
Total engineering plus
basic metal            14.2     n.a.     18.3     20.6     30.1
Total engineering only                                       26.9      100.0%
Total all manuf. ind.   134.9     n.a.    214.6    240.2    261.1
Eng. plus basic as %
of total mnmif.      ln_%      n.a.     8.1      8.6%    11.5 Il
Source:  Survey of Industrial Production 1966, 1969, 1970, 1971
Note:  Labor costs include wages and salaries, employees contributions to
provident and pension funds, gratuities and other benefits in cash
or kind.



Gross Investments 1966-1971
(in Shs. million; current prices)                                       Table 5
Gross Investment                !    % Total
ISIC Industrial Sector                                               -  Engineering
1966     1968      1969     1970      1971 I   Only 1971
.7a Bai;c me,e-L .UI.
372  incl. rolling     )5.3
I 3-3      1.2   ~   1.       6.            l
381 Fabricated metal                                                         . l
prooduct,s                                                 3 °)4.6%
382n MacI nry  (otvhe -
than electric)    )                                         0.7       12.7%
383 Electrical mach.,   (                                             l
apparat-Lus,       J 
appliances                                                   0.7       12.7%
384 Transport equip.       2.1       0.2      0.6       0.9      1.1       20.0%
Total engineering plus
Uasic metal              6.6       6.0      6.3     iJ.5      10.8
Total engineering only                                           4.)        .u,
Total ali manuf. ind.    192.2     7(0.1    lOo.J  O.i         i.2 (
ETng. plus basic as %
of total manuf.          3.4%      7.9%     6.3%    13.3%      6.9%|
Source: Survey of Industrial Production 1966, 1969, 1970, 1971.
Note: Gross investment consists of expenditure on new fixed assets
together with additions, improvements and major alterations to
existing fixed assets such as buildin6s. machinery and eauipment.



Imports of Basic Metal and Engineering Products, 1969-1973
(Shs. million; current prices)                                      Table 6
Value of Imports (Shs. millions)       % Total
SITC Trade Classification      -         .                                 Engineering
.1969     1970     1971      1972      1973 i    Only 1973
69 Manuf. of metal          74.2     85.2    ]L6.8     111.3     138.7        12.1%
71 Machinery (other
than PThntric)         193 48  3    P9.    l)16 9            399.8 I     3h).8%
79 RI P. - .:io r-qInnrh !h
apparatus,
appliances               75.3    102.8    135.2     160.9     213.8        _ ___6
73 Transport equip.        195.8    287.6    369.8     309.7     396.9        '  [4T
Total all eng. mnf.        EqI      R, -7   1q09A7      9q9  l   1, I) I   v .  I 0nn n
Total all net iApors        1 A18.8 1939.2  2)14.)    2597 6    3139.5
Souc ell Ane     Annal      rad oReports 416  4- E.               36.6
Source: E.A.C. Annual Tirade Repoorts



Size Distribution of Engineering Establishments, 1971              Table 7
No. of Workers            Number of Establishments                  I    % of
in          Fab. Metal   Mech. M/c  Elec. M/c   Transport         Total No.
Establishment     Products   & EMuip.   % Eauik.   _   UicD..  Total   of Workers
500 and more       nil         nil       n           ni1       nil
100 to 4i 99        6           1          2                     2       612%
<0 to 99   5           ~   ~1   ni.).)                 10         __1._0
20 to  9           8           6          1          3         18       1_1, 8%
10 to +. 19        3           7         1                     I 15        n
Total N,-mber
Establishments      22          15          4         14          55     100.0%
Total Employed   1,987         511        337        975      3,810
% of Total        52.1%        13.4%      8.8%       25.7%     100%
Source:  Survey of Industrial Production 1971



Geographical Distribution of Engineering
_UlUustries iwnd 1X.pLloU,ym,enI., 197 I                                T LablLe 8
T            !    ..Wsha and1 i                     I
Coast        Tanga      Kilimanjaro    Mwanza        Total    Total
No.   No.    No.    No.|  No.    No.   INo.    No.jI Pe-sons I      b-
EEmp.        E Emp. Est   Emp    Est           Es     Engaged. lishment
Fab. Metal                 l ,                                  2     l            2
pr  -         Al. s  It 19  715 1.  | - --    - --                 I 8   O197  0 2
& Equip.         262    1     161   5 1    59    h    1 29      2  1   511    1   15
Elec. Mach.                                                      1
&. E   p.        1|                 =     1      1I                                4
Tr,spr                     IIIi                                                I
Equipment         932   113     22   1      10    1    |11       1      975    |   14
No. of
ZAILIPJJoyees
No. of
EstabL, sh.      3070   36     328    7    -9      6     221     6 
% of ,X1-1ployees
in Each
Location   80.68.6%                 5.0%     |_______         100%
SAouroe: a 4 ei of Inut1 iajl PrJjo        1971
Source: Survey of Industrial Production 1971



Industries in Tanzania, 1968                                        Table 9
Number of Firms          Trade or Industry        Number of Employees
Agricultural eauipment
8                repairers                         7
11              Bicycle repairers                   8
15              Electricians                       68
6              Motorcycle repairere
35              Motor mechanics                   349
43              Sheetmetal workers                 87
4              Typewriter repairman
25              Watch repairers                    18
TOTAL 147                                               537
Source:  K- Scha2dle, page 1Z 01



-Wonn Pnt.op ::nA P-inmoFnnT T..C nn.PIfT
Engineering Establishments, September 19714                Tble 10
Hlo-s     nDasc          Wage        LaoJI  oUsU Per
Worked    Eatnings       Rate         Working Hour
r^ Uks V VI           I "11- IIUuLL   -IL;ILUUIIl,
Week,      Month      (Shillings)    Fringe Benefits
Basic Metal & Fabriq,~ted
Metal Manufacturers
Company No. 1            45       425/-          2.19           2.84
2            45       600/-          3.09           3.86
3            44       500/-          2.62           3.66
4            45       400/-          2-06           3.09
5            45       450/-          2.32           3.01
Avetate                                          3.29
Mechanical Machinery
aqnd Rpnairs
Company No. 1            42       500/-          2.75           3.43
2            145     500/=           2.63           3.14o
3            44       800/-          4.21           6.48
1.     1I,r e                                       -)   n
L4           1)       520A/ -        2.68 UU
Average                                         14.10
Electrical Sector
Company No. 1            43 3/14  500/-          2.64           3.43
2            42       500/-          2.76           3.17
Average                                          3.30
Transport Equipment
Establishments
Company No. 1            42       625/-          3.43           4.80
2             I5     1450/-          2.31           3.35
3            45       850/-          4.36           6.54
5            42      1000/-          5.52           7.72
A,r-"-4- 2.n1
Source: Based on information collected during visits to ccmpanies.
1/  Fringe benefits include paytent for annual and public holidays, provident fund,
2% housing tax, free untvifr8s, subsidized canteen, medical facilities, time
spent on literary trainixg, bonus payments, transport, etc.
2/ The major part of the work force was male, even in the electronic sector.



Exports of Engineering and Metal Products From
Tanzania and Transfers to E.A.C., 1973    (in Shs. million)         Table 11
Of -ihich
Total      Exports
SITC                                                    Exports       to LAC
Manufacturers of Pbletal
673   Iron and steel bars, rods, angles, sheets           0.40          --
684   Aluminum circles and sheets                         2.90          --
691   Finished structural parts & structures              0.02         0.02
652   Metal containers for storage & transport             1.84        0.0o
693   Wire products (excl. electric), fence,
cables                                            0.04         0.04
6sL4  Nails, screws, nuts, bolts                          0.55         o.55
695   Tools for use in the hand or in machines             0.31        0.01
697   Household equip. of base metals                      1.47        1.47
698   Manufactures of metal (locks, hinges, etc.)         0.23         0.23
sub-total         7.76        2.40
Machine     Other t+hanElectrc
712   Agricultural machinery & implements                 0.49         0.149
719   Machines for speciall i           -   Vile,
mining, etc.                                      0.17         0.17
715   M-achinery & appliances & machine parts             0.04         0.01
II      .L        .                                        _L
sub-total         0.70        0.70
Electrical Machiner. A_aratus & Apliances
724   Telecommunications apparatus, e.g., radios          4.77         4.77
729   Other electrical M/c & apparatus,
e.g., batteries                                   6.22         6.22
sub-total        10=99       10.99G
T-ransport Equipment
732   Road motor vehicles                                 0.01         0.01
sub-total         0.01        0.01
GRAND TOTAL      19.46       11.30
Source: Annual Trade Report, E.A.C. 1973



Imports of Engineering Products
(Shs Mœillion)                                                     Table 12
SITC                                   19690   i1070      1071     1070      1°07
69   Manufactures of Metal
691   Finished structural parts
s stuctures                  IL&.OI     ;.,e        I                  e2
692   Metal containers for storage
& transDort                      3.15     3.55      1.02     6.27      6.71
693   Wire products (excl.
electric), fence, cables         5.67    10.18    21.90     13.08     8.58
694   Nails, screws, nuts, bolts,
rivets, etc.                     3-11     7-93    12.09     12.28    12.90
695   Tools for use in the hand or
in machines                     19.07    23-39    25.71     13.84    32.49
696   Cutlery & razor blades            4.39     5.62      2.69     0.72      3.17
697   Household equip. of
base metals                      6.97     7-53     10.57     7.73    11.64
698   Manufactures of metal (locks,
hinges, etc.)                   17.27    23.3          0    28.30     35.8
sub total   71.2J    8'.16   1h6.18    111.2'   1 3 =C
71   Machinery other than Electric
711   Power generating machinery
other than elct2               15-57     i 7 . .   33-29n   320-77    l°.R1
sstnuv.U L4UWS ..LIU ~JA    I)~,      ID       JJ*&7 -
712   Agricultural machinery
and implements                  32.59    33.61    42.03     40.07    49.16
714   Office machines                   6.12     7.83      8.06     8.32      e.07
715   Metal working machinery           4.51    14.01     15.01    33.42      4.41
717   Textile & leather machinery      22.55    37.10     21.25    20.92     27.57
718   Machines for special
mining, etc.                    47.19   102.66    111.35   100.11     79.69
719   Machinery & appliances
and machine parts              66.27    176.32   213.5"    175.94   190.96
sub total    1 93.70  39.07    444.90    411.55    399.67
72   Electrical Machinery,
AnnarRtus & AnnlianOIOE
722   Electrical power machinery
and switches                    18.30    19.84    49.70     53.61     26.49
723   Equipment for distributing
electricity                      5.73    13.98     22.78    22.10     11.65
720   Teleconmnications app-ratus      25.72    39.90     42.40    48=72    12f -77
725   Domestic electrical equip.        9.27     6.48      6.65    10.45     12.50
726   Electrical apparatus for
medical purposes                 1.10     3.87      2.03     1.71      1.46
729   Other electrical machinery
& apparatus e.g., batterie-     1.       18.7z     x34.7v
sub total   75.21   10.6     135.1     160.94        5
73   Transport Equipment               2.59    19.36     64.93    89.75     77.00
731   Railway vehclO-es-              1. .n     r. l .                      978.0
732   Road motor vehicles             174 39      4 ."0  254.95       1     28
733   Road vehicles other than
733 ors &U>   b4Icycoles        12.7h    21.97     29.48    24.63     33.27
734   Aircraft & parts                  0.48    39.40     19.75     1.46      2.65
& boats         j.    ~~~~~~~~~~~  0.69     1.7       60
735   Ship&                                                       ______Z      =--
sub total   1 55 .4  20      JOU        3  - V i      -
,,,-...m rn/VAT (:10 (9O  PA.-AO  '£6.66  991.39 1
Source:  vA{ AlTnu-l Tr3de .Reports



Imports of Engineering Products
in Descending Order of Value                                  Table 13
SITC           Description of      : Average Value : Individual : Cumulative
Classification        1971, -72  73       /            %
T Shillings      of Total    of Total
millions
732       Road motor vehicles (cars,
motorcycles, trucks,buses)    241.70         22.26
719       Machinery and appliances
and machine parts (not
classified elsewhere)         193.60         17.83       40.09
718       Machinery for special
industries (construction,
mining etc.)                   97.05          8.*S4       4 '.03
731       Railway vehicles               77.23          7.11       56.14
724       Telecommunications
pparatus                      73.29          6.75        62.89
71 2      Agricultural machiner-
and implements                 43.75          4.03        66.92
722       Electrical Power Machinery
and switches                   4-.26          3.98        70.90
711       Power Generating Machinery
(other than electric)          35.29         3.25        74.15
698       Manufacture of metal (locks,
hinges)                        32.76 3-02                 77*1 7
691       P4nished structural parts
and structures                 30.71          2.83        80.00
Remainder of Classification   217.75         20.00       100.00
Grand Total                 1,086.39






Imports Less Re-Exports for                            (Page 1 of 4 pages)
Iron and Steel Goods - Tanzania, 1973                     Table JL
T Quatity   Value
'S.I.T.C.    Primary Iron and Steel Materials        | Quantity   iT.Iigs
(million)
6,7 1    Pig -Iron, Steel Powder & Shot             I,3           2.94r  O
672      Ingots - including blanks for tubes &      6,260         6.26
pipes
673.1 | Steel or iro  wre rod                   |   33      |   05
.2   Bars and rods                              10,458     |18.81
*9 J Angles, Shapes & Sections                   3,555         5.88
674.4.1   'Corrugated plates and sheet-uncoated     |            |
4.2   Flat sheet up to .355 mm (.014")           14,263        26.49
A   n  N$C1 $. MI 4  fZcc:              _I        O   rA A     'SC   A n
I-t.  r 1 X  _L   U  "I :;  U     mmiII5  ._L Cd, 0.9'
4.3   Universal plates                               23         0.06
4.9 | Other plates                              j   161         0.31
674.5.1    Coates or Galvanised sheet and plates         485        1.09
.1   Corregated sheet                                6         0.01
.2 | Flat sheet exceeding .355 mm                  133         0.26
.3   Enamelled, Printed sheet                       57         0.12
.5   Others                                        446         1.03
674.6     Stainless steel plates                         16        0.16
.7    Tinned piates                                               Do6,999  ±i4.38
675t).0  Hnoop and strip steel                      iO,265        20.i6
o76.u     Rails of iron or steel                    52,908       l1l.27
.2    Sleepers and other Railway trucks         113.506        39.54
677.      Wire for Nail Manufacture                  5.929        10.00
Wire for other uses - fences etc            1,069         3.60
678.1     Tubes and pipes of caat iron               8,302        13.21
.2    Steel tubes - seamless                       all
lexuorted    I   -
.3    Steel tubes - welded, clinched              2,687         5.80
.4    High Pressure   Hydro Conduit                  31         0.19
.5    Tube & pipe fittings                        1,457      J  9.66



(Page 2 of 4 pageg)
Table 'u contId.
679     Iron & Steel Castings & Forgings -         Nil          Nil
Unworked
TOTAL IRON & STEEL PRIMARY IMPORTS      149,313   |   297.21
Tonne    T. Shillings
millions
TOTAL (Excluding Tanzam Rails &          82,899       157.40
Sleepers)                       I Tonne   IT.Shillings
_ _   _ _  _   _   _   _   _   _   _   _             |  millions
I T   'I          Simple Semi-Finished and        [Quantity [   Value
0.1.].           Finished Products                Tonne    IT.Shillings
691.      Steel doors and windows                      184        1.58
Other finished structural parts           5,471        22.50
693.1     Wire cables, ropes, bands, slings            672        5.17
.2     Barbed wire                                  139        0.31
.2   1 Fencing Wire                            All exported     -
.3     Fencing, netting, grill                |    516         3.44
.4     Expanded metal                               130  |     0.35
694.1     Nails, tacks, staples, spikes          |     189        0.59
Bolts, nuts and washers                     865         5.44
.2   | Wood screws                                   12        0.20
.2     Other screws, rivets and similar articles   978         6.16
695.1     Hoes (Jembes)                                981        4.89
1    1                                             n1.S M  (  n24  1.1 7
.1     i'icL LAJI1tv LZ                            C..N) +
.1     Other hand tools used in Agriculture         589        2.94
.2     Hand saws & saw blades                       298        1.49
Pliers, pincers, spanners, files & shnars   647         ' 3.23
.2   | Hand tools not elsewhere specified          70    |     3.52
.2     Interchangeable tools for hand & m/c tools 300         13.80
uutting Dlades for machines                  50         1.39
.2     Tool tips - Unmounted of Sintered carbide     12        0.03
698.8     Soldering and weld rods                      626        4.50
.9     Man hole covers                        |    409         0.60
TOTAL SIMPLE SEMI-FINISHED AND FINISHED 14,800         83.30
PRODTTCTS                                Tonne      . Shillings
million



(Page -3 o  14 pjageur-
Table 14 cont'd.
|.I.T.c.  |nteirnediatI Quantity|                        Value
S.I.T.C.1   Inzermediate Finisnea Products             Tonne    T. Shiline
692       I Tanks, Vats, Reservoirs - exceeding        252       1.01
300 litres
Casks,Drums, Boxes, Cases                    412        3.95
Compressed gas cylinders                  +  194        1.67
697       Pressure stoves                                8         0.16
Parts for Pressure Stoves                     14        0.28
Domestic stoves, boilers, cookers             88        1.76
| Enamel Hollow ware                            23     |  0.70
Domestic utensils of stainless steel          15        0.46
Household buckets                         I 1436        4.78
Domestic Utensils of Iron & Steel         I 482         2.35
598        Locks, padlocks & keys                      411         8.23
Furniture fittings, hinges, catches          218        4.36
I Sales-and. strong room fittings             i    10.59
| Chain and parts                              165        1.75
Anchors, grapnels                             11        0.09
Pins & needles                               300        2.34
| Springs and leaves                           686     I  4.87
Name plates, sign plates                       3         0.08
Earth Pans (Karais)                            1         0.01
I Tanks. Vats of 300 litres caDacitv or less     4        0.16
Articles of iron 7 steel n & s               781     |  5.55
TOTAL INTERMEDIATE FINISHED PRODUCTS       5,523       44.95
Tonne
I__ _ _ __ _ _ _ __ _ _.___ _ _ _                   I  -I
4. Complex Products with Import Substitution Possibilities
733.1    | Bicycles                                    1183       13.12
733.1     Parts for bicycles                           497         5.52
733.3     Trailers not motorised                      | 152     I  5.70
715.1    | Machine tools for working metal            | 101        3.50
715.2    | Metalworking machinery other than M/c tols    38        0.84
719.5      Machine tools for working wood and plastic 257          8.91
719.2     Manufacture of pumps for liquid               573       18.21
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __-_  3_ _ _ _ _



(Page 4 of h pages)
Table JL cont'd.
ISI.T.C.                                   Quantity     Value
I Tonne     IT. Shilling,
719.2     Centrifuges                                 170        5.61
719.3     Lifting and Loading Machinery             1,280       20.57
719.9     Transmission Shafts, cranks & pulleys   11,462        23.52
718.4     Construction Machinery                    1,814       39.94
711.5   | Internal combustion engines other than       25    |   6.08
I motor vehicles
711.5     Spares for above I.C. engines                88       21.23
712.1     Agricultural M/c and implements for         962        8.20
preparing and cultivating soil
732.2     Buses                                     1,029        3.85
732.3     iLorrles and T.rucks                      4, 112      4.04
732.7     Truck chassis with engine mounted        11,085      116.65
731.8     Chassis frame & spare parts for motor     5,808       60.78
vehicles
731.6     Railway & Freight & maintenance cars      2,200       22.21
731.7     Spares for locomotives and rolling        2,549       26.70
stock
r TOTAL COMPLEX PRODUCTS                   35,385      454.18



Demand for Iron and Steel Products
that are Potentially Eligible for
Lmport Substitution, 1973 and 1979                              Table 15
1973              1979
(Metric Tons)     (Metric Tons)
Primary iron and steel materials
(excluding rails and sleepers)                 82,899             120,900
Simple semi-finished products                   14,oo8             20,hoo
Intermediate finished products                   5,523              &,100
Complex products with import
substitution possibilities                      35,385             51,600
Total                               137,815             201,000



Composition oi Demand for Iron and Steel
Products in 1°7? with and without Further
import Substitution (in Metric Tons)                              Table 16
1979                   19795
Without further        With aggressive
inport substi-        program for import
tution'               substitution
FPrimary iron and steel
materials                           120,900                120,500
..Siril?e semi-finished and
finiEned products                    20,400                  7,100
Shift in demand to primary
materials                                                13,300
3.  Intermediate finished products        8,100                   4,900
Shift in demand to primary
r:laterials                                               3,200
4. Com.lex finished products             51,600                 42,160
S,ift in demand to prinary
,.aterials                                                9I,440
of which for:
Bicycle project                                       ( 2,164)
Bicycle parts                                         (  913)
Trailers                                              (  208)
.vood working machinery/tools                         (  372)
Pumps for liquids                                    (   573)
Construction and loading equipment                   ( 1,180)
Cranks, pulleys, shafts                               (  730)
Agricultural machinery                               (   700)
Bus and truck bodies                                  ( 1,000)
CKD trucks                                           (   300)
Railway freight trucks                                ( 1,000)
5.  Total demand for primary materials  120,900                1L6,840
Source: Kission Projections



AN!NEX IV
CURRENT STATUS AND DEVELOP'WNT PROSPECTS OF
THE TEXTILE. INDUSTRY IN TANZANIA
Table of Contents
Page No.
S-mmary and Conclusions                                           1 - 3
Chapter I:      The Textile Industry ........................       4
Introduction       .......................          4
Production and Ownership.                           4
Sninnine Canacitv .,                                5
Weaving Capacity.                                   6
Converting Canacitv-                                6
Raw Mlaterials .........                            7
Prodctiietuv and Gos-ts   ....            .
Chapter TT:     Marketing and Pricing nf Tpextiles -               11
Organization ................................      11
Pricing Policy and Distributioi'n ............     11
Import Restrictions .........................      13
Chapter III:    Domestic Demand and Export Prospects .15
Dom,.estic ADec,and ProJections .   ...          15
Export Prospects .17
Chapter IV:     Priorities and Prospects for Future
T.,pansion of the Textile Industry 19             I 
I2.ApWL  _LLJLL  IJJ             L.UC  1. .L.L. .A.U.O.L.. . ,
Priorities for Investment .19
C-onstraints on Development of
~UL  L aJLLL  IJL   UC~ULL  Lu.
the Textile Sector .21
Statistical Appendix






ANTNEX IV
Page 1
SU1W4AKRY AND CONCLUSIONS
1.        Tanzania's textile industry was given special attention by the
sector mission because it is at present the largest single industry within
the manufacturing sector (accounting for 25% of employment in and 13% of
value added by the sector in 1971) and because important decisions have to
be made about the direction of its future development. In recent years,
Tanzania has made great strides towards self-sufficiency in woven cotton
fabrics. Starting from almost complete import dependency prior to 1966 the
textile industry achieved more than 80% national self-sufficiency in 1972.
All major mills are now owned or controlled by the Government through the
National Textile Corporation (TEXCO) which is a holding company owned by the
State. All imports of and domestic wholesale trade in textiles are confined
to the National Textile Industries Corporation (NATEX) which is a wholly
owned subsidiary of TEXCO. One of the main concerns of the mission is that
productivity in most of the existing mills is low and appears to have fallen
somewhat in 1974.
2.        A number of small projects to increase the capacity of several
existing mills are being implemented and a major project to double the capa-
city of the Mwanza mill is in an advanced stage of preparation. These are
all soundly conceived, high priority projects. Their implementation should
enable Tanzania to become self-sufficient in woven cotton fabrics and
probably achieve a small exportable surplus by 1977 or 1978.
3.        Rapid expansion of the cotton based textile industry is a key
element in Tanzania's recently adopted long-term industrial development
strategy. This strategy aims at a gradual restructuring of the economy by
linking the pattern of production more closely to domestic resource avail-
ability and local demand. The production of exportable surpluses is seen as
a logical extension of this strategy after all or the maior portion of
domestic demand has been satisfied. The production of cotton textiles fits
this strategy as practically all cotton fabrics produced in Tanzania are
made of locally grown cotton. Only about 15 - 20% of domestic cotton produc-
tion is at present used by the local textile industry; the rest is exported
as raw cotton, mostly to the Far East and some to Europe.
4.        The bulk of Tanzania's cotton crop is of the medium-long staple
variety (1-1116") permitting the manufacturing of a high quality fabrirc
Most of Tanzania's locally processed cotton is however, "underspun". This
means that the same cotton could be used to make finer ro-int fabrics or
alternatively that the fabrics presently made in Tanzania could be made from
cheaDer. shorter stanle cotton. The mission considered the alternative of
exporting more top (AR) grade medium-long staple cotton but concluded that
the economic merits of this alternative would be negligible or negative.
The mission also studied the suggestion made by UNIDO in 1972 to increase
the use bv 1 nca1 textile industries of domestic low (!R) grade cotton (most



ANNEX IV
Page 2
of which is at present exported) so as to release more of Tanzania's high
priced top grade cotton for export. It appears that inconsistency of quality
of low (BR) grade cotton (partly due to unreliable grading at the ginnery
level) is the main obstacle to following up this suggestion.
5.        Another issue considered by the mission is the choice of the next
major project for the expansion of the textile sector (beyond the expansion
of the .wanza mill). Various options are open, including (a) the establish-
ment of another newly integrated cotton textile mill (which ap~pears to be
the Government's plan), (b) the further expansion of existing mills, and
(c) to concentrate on increasing the production of cotton-polyester blended
fabrics before proceeding with the furtlher expansion of pure cotton fabrics
manufacturing capacity.
6.        The mission concluded that the third alternative is probably the
most attractive one deserving serious consideration by the Government for
the following reasons:
(a) Tanzania's medium-long staple cotton is technically>ideally
suited for blending with polyester fibres which gives Ta'nzania an
advantage in blended fabrics manufacturing compared to many other
primary cotton producers.
(b) The domestic demand for blended suiting and shirting fabrics
is already around 24 million meters per annum (or about one-quarter
of demand for all fabrics) and - like world demand - has been
growing more rapidly than the demand for pure cotton fabrics.
Production capacity is at present limited to one million,meters
per annum.
(c)  The foreign exchange savings that could be achieved through
import substitution of blended roti-on--no1vPqtPr fahrirc are
at least as good and probably better than those associated with
the exDansion of all cotton fabrir produictinn fnr theo 1ocal
market and/or exports.
(d)  The low productivity and high production costs of Tanzania's
existing textile mills are serious obstacles to the launching of
a major cotton textile export drive in the next few years.
7.        Tanzania has in recent years exported modest quantities of locally
madeo cntto-n faric t-o n-e4hborin, count:rie  4n Ar-.     A ,,.ao e
~  a itLU.z.  t~a.  a iriJ% ui.  &FVI L  Ut-±Vye
however, would probably have to concentrate on the European and American
mark ets where competition from local and low cost Asianproduzers Is fierce.
Neighboring countries (with the possible exception of >lozambique for which
no reliable inform .atIon could be obtained) are or are soon expected to
become self-sufficient in basic cotton fabrics. Concentration on import
substitution for blended fabrics as the next iajor step in the development



ANNEX IV
Page 3
of the textile sector (following the expansion of the Mwanza mill) would
give the existing mills more time to achieve the productivity improvements
required for a successful and sustainable export drive beyond the shores of
Africa. A major (say 20-25 million meter capacity) polyester-cotton fabric
project, if commenced within the next two years, could bring Tanzania's
total imports and exports of woven fabrics into balance by 1980 and eliminate
the current annual deficit of around US$30 million on net textile imports.



ANNEX IV
Page 4
I. THE TEXTILE INDUSTRY
Introduction
8.        Tanzania's teextile industrv whirh was virtiallv non-existent ten
years ago has rapidly expanded and now ranks first in the manufacturing
sertor, nrriotntiinpv for (1971) nearlv 292 of Pmn1ovmPnt, 13% of vauii aridded
and 11% of the value of output in the manufacturing sector as a whole.
Employment in t-ha Qninning and weavin of cotton textilesIis at present
around 14,000. The garment industry employs an additional 3,000. The
cotton textile 1nd;ustry 4s now apronaching natIoinal s,l1f-c,,ffi4c4ncy? nnd
important decisions have to be made about the direction and size of its
future developm.ent.  The main purpose of this .Annex is to analyze the current
situation wvithin the textile sector and its likely prospects so as to
provlde th  bcgrud       euie     for a sound se-toral develo-&- srtey
9. 4J  ...i The'SW l t. t rdu     ,ot      -aed ootton fabrics.   T.hte produc-
tion of combed yarn and fabrics is negligible and until recently no synthe-
tic osythetic=cotton bler.ds have been produced.      ^'m.ost all th-e wioven
tic  or4  syL.LLI  L±-L  )i LtJL  UOLLUO  Liav   CL  bJ J UL U*  tILJ L  J_.L.   Lite W  C.
fabrics are produced from locally grow7n cotton; only 157 of the cotton,
hiowever, is processed and the balance is exported, mostly to Europe and
Asia. Mlanufacturing of blankets was begun in 1961. Between 1965 and 1969,
five spinLIing and weaving mills were built, the Lwo biggest and most recent
ones -- Nwanza Textiles and Friendship Textile Mill -- by the public sector.
The historical growtlh of cotton fabrics production is shown in Table I below
and the share of each of the existing mills is reflected in the Statistical
Appendix of this Annex, Table 8.
Table 1
Local production of cotton fabrics, 1966 - 1974
(in million liiear meters)
Local                 Imported           Total Local
Year    Production                In Grey           Production
1966         8.0                    -                      8.0
1967         10.0                   -                     10.0
1968        33.5                    -                     33.5
1969        53.3                    -                     53.3
1970        60.2                    -                     60.2
1971        66.2                    -                     66.2
1972        70.2                    -                     70.2
1973         71.7                   2.3                   74.0
1974         71.8                  4.5                    76.3



Page 5
10.       The first spinning and weaving mill was built in Tanzania in 1965
and in 1966 domestic production accounted for 10.3% of the consumption of
woven fabrics. By 1973, Tanzania produced 71.7 million meters of fabrics
(all cotton) accounting for 84% of domestic consumption (and 68% of all
woven fabrics consumption). The industry, employing 825 shifts, was operat-
ing at 79% capacity utilization in 1973. As from january 1974 the industry
has been employing 1,050 shifts per annum but, because of water and power
shortages, there has been only a slight increase in production so far. These
shortages should be rectified by 1976 and production may increase up to 84
million meters with the existing facilities. Minor expansion plans already
approved and in progress (including new looms to be installed in Kiltex,
Friendship and Sunguratex plants) would account for another 17 million
meters capacity and would bring total production up to 101 million meters
by 1977. Expansion of the Mwanza Textile mill at Mwanza (a project that is
already in an advanced stage of preparation and is likely to be financed in
part witlh a World Bank loan), would allow local production of woven cotton
fabrics to reach 121 million meters by 1980.
11.       After the Arusha Declaration (February 1967) the Government adopted
a policy of controlling and directing all major industrial activities,
including textile manufacturing, through parastatal organizations. The
major textile companies were incorporated into and operated as subsidiaries
of the National Development Corporation (NDC). In January 1974, all of the
larger textile activities including spinning and weaving, as well as manu-
facturing of blankets and agricultural (kenaf) bags, were transferred from
NDC to a new parastatal company, the National Textile Corporation (TEXCO).
TEXCO is organized as a holding company with a staff of 30 and an operating
budget of about Sh 4 million. TEXCO holds 33 to 100% of the shares of eight
companies and exercises complete responsibility for overall management,
production, planning and expansion programs of its subsidiary and associated
companies (Statistical Appendix, Table 6).
12.       The marketing of all the Droducts manufactured by TEXCO companies
is carried out by the National Textile Industries Corporation (NATEX), a
whollv owned subsidiarv of TEXCO. NATEX is also resDonsible for the export
and import of yarn, fabrics, garments, as well as other textile articles
and agriciiltural bags The aarment manufacturing and knitting industry
consists mostly of small production units in the private sector.   There are
also two small private rnttnn weaving mills in the private sector (Statis-
tical Appendix, Table 7).  The value of output by privately owned textile
and garm-ent industries in 1Q73 twas estimated at Sh 10( million romnared to
Sh 576 million in the public sector.
Spinning Capacity
13.       In 1973 there were 94,000 cotton spindles and yarn production was
estimated at 11,300 metric tons !1 (Statist1cal Appendix, Table 7). Ya rn i
1/   120 kg/spindle per annum based on three shifts - average count
20 Ne (English count).



ANNEX I\V
Page 6
produced by 'twanza Textiles, Friendship, Kiltex and Sunguratex but only
Friendship produces in excess of its requirements. The extra production is
sold to private weavers and knitters as well as to Mwanza Textiles, and
Kiltex. Only 100 metric tons were exported. Imports were negligible while
one company (Sunguratex) reported a shortage of yarn on the order of 500
tons. By 1982 yarn consumption is expected to increase to 20,000 tons. To
satisfy future demand, 8,600 new spindles will be added by Sunguratex, and
and 22,500 spindles is included in the Mwanza expansion. Plans are also in
hand to modernize and rehabilitate the existing equipment (spinning frames)
in Mwanza, Kiltex and Friendship textile mills. With the addition of
another shift to the present three shifts (bringing it to 1 ,050 shifts per
annum) the production of yarn by 1982 should exceed demand by some 500 -
1,000 tons, which is a reasonable safety margin.
W.eaving Capacity
14.       The total number of textile looms installed and active is 3,200
(excluding blanket looms), including 2,700 in the four integrated mills. 1/
The average production per loom in 1973 was 26.8 thousand meters and the
total production was 72 million linear meters (Table 1 above). Including
minor expansions approved and already in progress, at full capacity utiliza-
tion (1.050 shifts) the production is expected to reach 102 million meters
by 1977 and 122 million meters in 1980, when the expansion of Mwanza Textile
mill is completed.
Gonverting Canacitv
15_       Tn 197'- the industry's capacitv to dye, print and finish textile
fabrics was substantially greater than the volume of loom state woven goods
produced.  Out of 71 -7 mi111in meteprs of woven fabrir nroiir,cd- about 12
million were either sold in grey or in a bleached state, 36 million meters
were printed and 24 mIllinn metprs dvye  (Statistiarl Appendix, Table 10).
At the same time, printing capacity was estimated at 49 million and dyeing
capacity at 27 million meters.   To take audnrago nf the existing unised
capacity, 4.5 million meters of gray cloth were imported in 1974 for print-
4ng l4n Tanzania, and the plan is to 4impo4rt- more grery t-o ru e- athe  hortago
of printed fabrics in the country.   The expansion of the Mwanza Textile mill
4n 11w anza (MTL) provides for aditional printing capacity for 23.5 min llion
meters. Another 11 million meters of printing capacity will be added as a
part of the tepA1Lansion anu rehLabil 4tatfion of Friendship anA cunguratex plarts.
The dyeing capacity will also be increased to reach 33 million meters. In
1980O therefore th'e tota'l d'yeinrg and4 printing capacity in Tanzar,ia will1 reach
I ~~OU  LLI~~1~~ LUJ. ~~  LII~~  LU L~~.L  uy ~~±iL~~  CLkIU  jJ1. JALL.LLI~~~~~,  L~~jJaL.L L~~  LII  J-aLLt.~~~u  LL(.  WJ.LJ.J. .
117 million meters (plus yarn dyeing capacity equivalent to 6 million meters)
_~~~~~~~~~ _ _j   _  _  -  -  -  -3 - _: -  -  _  _- : _   -  -  - I  -  -  -  -  _3  -  -   I  1 q#1 _t 1   _ I  I J  -__
as coipardLea' Wi Lth we6V.Ing PLUUULLLUII Ub LlLIdLCU dL I - IIILll lI III LtL
16.       Projected printing capacity by 1980 will be around 84 million
meters but because of the substantial demand for grey, bleached and dyed
fabrics, only about 63 million meters of the domestic woven fabric production
of 122 million meters will be available for printing. It may therefore be
1/   t4wanza, Friendship, Sunguratex and Kiltex.



ANNEX IV
Page 7
expected that substantial surplus printing capacity will arise after the
implementation of the above mentioned projects. This projected temporary
imbalance is, however, not considered a serious matter, as the excess
printing capacity could be used for the printing of imported grey goods in
the event of a short-fall in domestic woven fabric production or in case of
a shift in demand from grey, bleached and dyed goods to printed fabrics which
is entirely possible.  The proiected dyeing capacity on the other hand is
expected to fall short of requirements and additional equipment may be
required within the next five years (Statistical Appendix, Tables 9 and 10).
Raw Materials
17.       'ost of Tanzania's notton rron is exnorteRd  The nialityv falls into
the mzedium-long capacity (1-1/32 - 1-3/32") which is suitable for spinning
yarn up to 50 cc.  The total rcron inrreaned from 160 t-hou,Qani balec in 195
to 430 thousand bales in 1973 (Statistical Appendix, Table 11). Ninety per-
cent nf the orrnn c crpso-clod AR gyrade which  c closle  to ITU Memnphi SM
1-1/16", and which sells in world markets at approximately 10% premium over
the price of 1" staple.  The other 10Y% is BR grade which consists of shorter
fibre lengths and contains over-ripe, weaker fibres; its color is also
inferior and the trash content is 12% as compared to 7%Y trash for AR quality.
The BR cotton sells at a 25 to 35% discount below AR type.
18.       Out of the 63,000 bales used by the local textile industry in 1973
only 31,0 JiSL00 bales were of the BR grade. The balance of BR Arade was exported.
It has been suggested that if all BR cotton now exported were used by the
SLoca'L industry, 37,000 r,.ore bUalles of AD cotlon would bAecome ava4lable ":or
export.  At current cotton prices, this would increase Tanzania's cotton
revenues buy over US$3,) .illion.  A strong reco.n.nen dation was mLa.e .y T1,VrhO
consultants in 1972 1/ to use more BR grade cotton, but so far little progress
[las been mi1ade. Several triLaLs hiave bUeen uadUe but prodUuctiLon 'losses Uue to
the high trash content and the inconsistent quality of BR grade cotton
outweighed Cary savin[gu  s .  I;iLL Ippear LL LLIU th LyOLrL used tLo LgrUade C;UottOn
in the ginneries has not been consistent or reliable and, consequently, the
quality o' BR grade received uy thie mtillS has been -varyn'g substantially
from shipment to shipment resulting frequently in inferior yarn, in loss of
prouuctLon and downgrading in quality.  Therefore, considerably more work
has to be done both at the ginneries as well as at the mills before this
course of action can be seriously considered.
19.       Another suggestion made by UNIDv consultants was to consider
importing lower grade 15/16" cotton for local production to replace the AR
type which can be sold at higher prices.  About 40,000 bales of the Tanzan-
ian cotton is currently "underspun", i.e., used in yarn counts which can be
produced using imported 15/16" cotton from the USA (ORKLEANS TE-xAS SIM) or
1/   Survey of the Textile Industry in East Africa, UNIDO, Vienna, 1972.



ANNEX IV
Page 8
Pakistan (PUNJAB/AC 134). The current difference in price (cif North
European port) between AR type and 15/16" grades is of the order of seven
US cents per lb (Statistical Appendix, Table 12). However, the cost of
shipping 15/16" grade cotton from any likely source (e.g., USA or Pakistan)
to Dar es Salaam is at present in excess of this price differential.
Productivity and Costs
20.       Production costs in Tanzania's textile industry are high by almost
any standard. This is due to low labor productivity, management problems,
and frequent supply disruptions (of water, power, intermediate inputs, spare
parts and occasionally also raw materials). There is no inherent reason,
however, why Tanzania should not be able to become an efficient producer in
the future. The problem of low productivity is very complex and touches on
almost every aspect of the functioning of the economy. One of the first
priorities should be to try and improve labor productivity.
21.       Labor costs per unit of outpult in Tanzania's textile industry should
be a fraction of those in Western Europe or North America because average
wages and fringe benefits are much lower in Tanzania (about 10% of those
currently prevailing in the US textile industry), while the equipment used
in most mills is very similar (the Friendship mill is a notable exception).
Because of low productivity, however, labor costs per unit of output in
Tanzania are only marginally lower in spinning and higher in weaving,
compared to those in the USA (see Statistical Appendix, Table 13).
22.       The figures indicate that labor Droductivitv in Tanzania's textile
industry has actually deteriorated between 1069 and 1974. This is caused,
in part, by a sharp increase in the labor force in 1974 to nrovide thr
fourth shift (starting from January 1974), which has not been accompanied
by any production gains so far.    Assuming a full canacitv itili7arion of
1,050 shifts per annum, a 20% improvement in productivity can be envisaged
within the next two years.
23.       One important factor causing low nrondirf-ivitv per man-hour is
serious overstaffing in most of the mnills.   The two largest mills, Friendship
and Mwanza both employed ir! 1973 some 755 more work-aers than in 1970 even
though both mills had become fully operational in 1970 and did not install
additional machinery in the mrnHnm    . The .Manza mill currently employs
(on a four-shift basis) some 2,400 workers.    A plant of the same size in
tNorth Aenprir iiusing the csmo qitn pment would employ no more than 300.  The
Friendship mill which has roughly the same production capacity as the M7anza
mi 1 I hit iucss a mh ol       (-a   -,re labor inter,sive)A  - hl ~  '  -currentl--
employs more than 5,000. The mission has not attempted to compare the
relative e4flciency of the Iwanza and Fri-endship technology mainly because
the degree of overstaffing in these two mills is different and the level of
_.kA)UkU UlU LL iJU UL t uLeiliLflned wITn
accuracy.



ANNEX IV
Page 9
24.       Production costs are further adversely affected by inflated prices
being paid by the industry for equipment, dyes and chemicals, spare parts,
as well as high overhead charges including a large number of highly paid
expatriates. A detailed cost comparison has been carried out for eight
fabrics produced currently by 24ITL with the costs of producing similar fabrics
in the USA. To eliminate the effect of fluctuation in cotton prices, the
mill margins (the difference between the cost of finished product and the
cotton content) were used as a yardstick for efficiency. The figures indicate
that Tanzania's manufacturing costs are 30% to 80% (55% on the average)
higher than the corresponding costs in the USA (Statistical Appendix, Table
17). This rather wide difference in costs is reflected in selling prices.
In the case of Kitange fabrics the ex-factory price of the local fabric
made in l4wanza in August 1974 was considerably higher than the ex-factorv
price in the USA or the import price c.i.f. Dar es Salaam of similar fabrics
imported from the USA or Asian countries. (Statistical Appendix. Tables 18
and 19.)
25.       Similarly, the mill margins and selling prices of carded cotton
yarn are higher in Tanzania than in the USA and Western Eurone (Statistirnl
Appendix, Table 20). The difference between the domestic yarn prices
hetween Tanzania and Eurone is not as significant as in the cnqp of fahric-c
However, when the costs of freight and duty are added it appears that
Tanzanian yarn can he comnpetitive in the European Comnnon Mnrleet only if
heavily subsidized. Without the 7% protective duty levied by the EEC on
imnorted cotton yarn the subsidy woit   ul d still have ton 1be aho,,U- S0.2 pr  lb
of yarn, or about 50% of the value of the cotton content at current prices.
26.       The mission's overall conclusion is that Tanzania's production
costs for woven cotton fabrics anA yarn have Ao c..e down s    iantly
before a major export drive for standard cotton fabrics can be launched with
a reas-onable cha-nce of economic gain.  The subsidy reqire              ---Iccssu
competition on distant markets (even in the absence of artificial trade
barriers) would under present relative price and cost conditions be prohibi-
tive and most of it would probably have to take the form of reduced producer
prices paidA to the cotton farmers. T.hlis dUoes not mean, ofL course, th-at
Tanzania could not export at all. There will always be markets for specialty
items (although foreign comupetition usually catches up quickly with new
opportunities) and there will also be periodic shortages of various items
in       ori     LUULLLLb LLcu.L desttTLL.LCL CUUlU fll..  Lxport opportunities
for 5 to 15 million meters annually may well be possible even if the Tanzan-
ian textile inuustry as a whole is non-competitive.
27.       As in all other sectors the serious shortage of well trained and
experienced Tanzanian managers is one of the principal constraints to
improving productivity.   Tne only miii wnicn is entirely managed by
Tanzanian personnel is the Friendship mill in Dar es Salaam which was built
with Cihinese aid (1967/68) and which uses a relatively antiquated technology.
Tlhe Chiinese training teams that initially managed the factory and trained the



Page 10
staff have done an excellent job.   They were graudally withdrawn over a
period of years in accordance with a detailed training program.    The other
four public sector textile mills have been managed by foreign companies:
Sunguratex by Tootal (UK), Kiltex (two plants) by Texunion (France) until
the end of 1974 and Mwanza mill (MTL) by Textilconsult (Italy).
28.       At MTL, there are currently 27 expatriates at the upper and middle
management level. Most of the key technical people have been under a
contract with Textilconsult which indirectly also owns 20% of the shares of
Miwanza. Apparently, because of a disagreement about dividend policy as
well as TEXCO's dissatisfaction with Textilconsult's performance, particu-
larly in the area of training, the present management contract may not be
renewed when it expires in March 1976.
29.       It may be expected that because of the Government's new income
tax policy, 1/ a number of expatriates including several key people currently
employed in .'TL will elect to leave Tanzania sooner than they otherwise
would have done. At Kiltex, all expatriates under a contract with Texunion
have already departed and the mill is now managed by expatriates under a
contract with Saigol Brothers of Pakistan. TEXCO which was formed only in
January 1974 has at present no technical and management personnel to fill
the gaps. Arrangements have been made recently by TEXCO with Saigol to
recruit management personnel for tMTL but even if the replacement of the
present management is adequate and competent, the expected rapid change
over of personnel could temporarily reduce the efficiency of existing opera-
tions and TEXCO's capacity to implement new projects.
30.       At present, neither the mills (except Friendship) nor TEXCO have
a well defined program for the training of technical, production or
administrative personnel. As part of the expansion of MTL, it has been
suggested to include a project oriented training scheme. The plan is to
select 20 Tanzanian nationals with at least high school education and five
years experience in the textile industry. Successful candidates would be
sent to one of the recognized textile schools in Europe, North America
or Asia for a six week specially designed crash course in textile technology,
to be followed by 12 weeks training in the textile mills preferably in a
location close to the textile school. In this way, a good start could be
made and valuable experience could be gained for the future formulation and
execution of a training program for the whole textile sector which un.doubted-
ly will still be required.
1/   Early in 1974 the Government introduced a more steeply progressive
personal income tax which reduced the after-tax 4ircome of the high
income earners.



AMVNY TNT
Page 11
II. .HARKETING AND PRICINNG OF TEXTILES
Organizat'on
31.      tAi yarns, LfaDrics, gar[lIents and other textile articles domesti-
cally produced as well as imported are marketed and distributed by the
National Textile industries Corporation (NATCEX). The company was rormea in
1970 and is a wholly owned subsidiary of TEXCO. Since 1973 NATEX has taken
over the sales, marketing and distribution of kenaf and sisal agricultural
bags and (as of September 1974) the procurement and importation of inputs
used by the textile industry. NATEX has also the sole responsibility for the
export of yarn, fabrics, garments and agricultural bags. The sales of NATEX
increased from Sh i16 million in 1971 to Sh 560 million in 1973, 64% of which
was of local origin. The sale of imported goods amounted to Sh 200 million
including Sh 15 million worth of agricultural bags, twine and hessian cloth.
Details of NATEX's trading activities are shown in the Statistical Appendix,
Table 14.
32.       NATEX operates 34 depots throughout the country and its own fleet
of vehicles for distribution. Because of its key marketing function NATEX
has also been given the responsibility to project domestic demand for all
textile goods and to prepare the production program for each of the mills
under TEXCO to achieve a balance between the composition of supply and demand.
On the domestic market NATEX sells directly to private and cooperative
retailers. Exports are effected by NATEX or directly by the manufacturers
under a NATEX endorsement. A government working party is considering a
textile trade reorganization plan that would transfer NATEX's domestic
wholesale function to the newly established Regional Trading companies.
Pricing Policy and Distribution
33.       The prices at which NATEX purchases domestic fabrics are determined
by the National Price Commission (NPC) of the Ministry of Commerce and
Industry and are generally based on ex-factory costs plus a profit margin
which on average is intended to be about 10% of costs. In practice, the
actual profit may vary from year to year and from item to item. The prices
are reviewed periodically (usually once a year) and as costs vary continuously,
the mills have occasionally operated at a loss or have been losing money
on specific items. (See, for a more detailed discussion of Tanzania's
pricing methods, Annex IV in this Volume.) To improve profitability the
margin for a particularly popular fabric (Khanga prints) was recently
increased to 31% to compensate for low profit and losses on other tiems.
Consequently, an examination of costs and selling prices of specific fabrics
reveals a rather complex structure. The current prices were established in
April 1974 on the basis of 1973 costs but in the second quarter of 1974, .HTL
was losing money on 40% of the items.



ANNEX IV
Page 12
34.       The price paid by NATEX includes Slh 0.3 per square meter Excise
Duty (which is the equivalent of about 15% ad valorem per linear meter on
average for all fabrics) and 25% Sales Tax (20% for Khanga).    On average,
the indirect tax on locally produced fabrics is therefore about 40% of
the ex-factory price. The taxes are collected by the mills and paid to
the Government.
35.       Until April 1974 the prices at which NATEX bought differed from
mill to mill, depending on their production costs. Since the mills had a
guaranteed market for their output (NATEX) this sytem did not provide an
incentive for efficiency.   Since April 1974 the prices at which NATEX buys
are based on the costs of the least efficient (marginal) producer. Con-
sequently, the other mills (when a particular item is produced in more than
one mill) now have an incentive to improve their performance compared to
the least efficient mill thus increasing their profit margin. This is a
small improvement over the old system but there is still no comprehensive
incentive framework that provides efficiency incentives to all mills under
all circumstances.
36.       NATEX's selling prices (to domestic customers) are identical for
the same produce produced by different mills and those prices are uniform
for all regional distribution centers.   Hence, 'NATEX absorbs differences
in transport costs between the mills and its sales depots throughout the
country.  Since NATEX - like other parastatal companies - is expected to
show a profit, it has an incentive to sunply the nearest depots first,
which is bound to lead to distribution problems, especially in times of
overall shortages. Textile goods, like many other consumer goods to which
similar pricing policies apply, are equally distributed wJith the distant
towns and rural areas facing more serious and more frequent shortages than
Dar es Salaam and other manufacturing centers.
37.       The price of cotton, which accounts for up to 357' of the direct
costs of fabric, is determined by the Economic Committee of the Cabinet.
Until recently, the price of cotton for the domestic mills was identical
with the price obtained in export markets. In 1973 and early 1974, a rapid
increase of cotton prices in the international markets created a situation
in which all textile mills were losing money as their selling prices were
frozen.  .Eventually, in April 1974, the price of cotton for domestic mills
wni fixed At S1l 7-L7 npr kv (iIqSn_47 nor lb) APlivPrPA_ nntn the nrir.c of
fabrics were adjusted upwards so most of the mills are expected to show a
profit for 1974.
38.       The freezing of the price of cotton to lnocl textile mills at a
point below the export price does affect the distribution of income between
cotton farmers and consumers of cotton textiles-   Tn this particular case,
the Tanzanian cotton farmer did not suffer any direct income reduction be-
cause the producer pri-ce for seed cotton -as f4xed much. below ex-trt parit



ANNEX IV
Page 13
while surpluses were being accumulated by the Tanzania Cotton Authority, so
the price reduction resulted in a reduction of surpluses accruing to the
Authority.
39.       Under the circumstances, the freezing of the cotton price to local
mills was probably a sensible decision. It enabled the Government to
stabilize domestic textile prices in a highly unstable international situation
without upsetting the cash flows of the textile mills. As a long-term
measure, however, the mission has grave reservations about any pricing policy
that results in subsidizing the textile mills at the expense of the cotton
farmers. To prevent this from happening in Tanzania, the Government may
consider adopting the general principle that domestic processors of raw
materials should normally pay the same price for those materials as foreign
buyers. Special circumstances may, of course, justify special measures but
as a general rule the Government should guard against pressures to protect
domestic industries and consumers of manufactured goods at the expense of the
raw material producers.
Import Restrictions
40.        Imported textile goods are subject to customs duties ranging from
30 to 45, and Sales Taxes averaging 33% of the duty paid costs. (The Sales
Tax on imported textiles is the equivalent of the Sales Tax plus Excise Duty
payable by local mills.) All imports are confined to NATEX but - like all
other importers - NATEX requires an import license issued by the Bank of
Tanzania. Import licenses are issued in accordance with a national foreign
exchange allocation plan which is reviewed at least once every six months.
The severitv of auantitative import restrictionq flurt-uiat-es wit-h the countrV's
overall balance of payments position and with the output of local mills.
41.       Locally produced textiles are given virtually automatic preference
nuor imnnrted goods    Tmnnrt dutiesi. t-hprfnror rin nnt- in thce fi-rct place.g
have a protective function but are revenue raising instruments. NATEX
nnrmnlTv sells imortmerId lytilpeq tn rptnilprs at cost nliis n lo'/ mark up on
total costs including all taxes. Retailers are also allowed (by the National
Price Com mi2ssian : m,vim,,m o,ncc ,aoonv   ovf 1nf° I n  o,-c  4 f-aMS
42.       Becanus,e of Tanzania's complicated system of pr4cing, import -14-n-
sing and confinement schedules, it is practically impossible to determine
with precision what level of nominal and effective protection is iA effect
afforded to the local textile industry. Perhaps the best method to gain
som      l.e impression of the                                 --elative efficienc  of.. Y  local pd tion compared t o
import alternatives is to compare mill margins (Statistical Appendix, Table
1) .  In 1974 th L ai v    ill- ma.ar6gi f-o  C4.5L1L UigIh diLferent TpLroducts of TLl
was approximately 55% larger than the average for a typical American mill
producing the same     U    Ifi thi' oUsUe m.LL1Us p a iid thtF e s almeL[ - pIrlc  f V- LUor tleir raw
material, cotton, the ex-factory costs of MITL would be approximately 40%
,iJLgh'Ier LhanIL a LthLLose ofLL LtLe £miirieLcan mill.  Ilowever, tile Ullerican miLLL uses



ANNFX IV
Page 14
cheaper (shorter staple) cotton than TMTL to produce the same quality fabric,
which means that the actuial cost difference is even greater, about 50k'. If
the US mill were to export its products to Tanzania then the landed cost,
Dar es Salaam would still be only about 75 - 85% of the ex-factory cost of
MTL.
43.       Another approach to the approximate measurement of the relative
efficiency of textile production in Tanzania is to compare actual production
costs in Tanzania (excluding taxes and subsidies) with import prices from
various alternative sources of supply. This is done in the Statistical
Appendix, Table 18 for Kitange prints. The Table shows that the MTL
ex-factory cost per meter is about 19% higher than'landed cost'ex-USA and
nearly 40% higher than Kitange imported from Pakistan. In other words, if
Tanzania were a market economy with no domestic price control and using
only tariffs to protect local industries, the nominal import duty required
to raise the price of imported Kitange prints to'the'domestic price level
would be of the order of 40%.   The equivalent effective rate of protection
would be of the order of 120%.' -These figures clearly support the mission's
view that Tanzania is not yet ready to become-a,regular exporter of cotton
textiles and that major productivity improvements are required to achieve
that position.



ANNEX IV
Page 15
III. DOMESTIC DEMAND AND EXPORT PROSPECTS
Domestic Demand Projections
44.        Consumntion of cotton and other fabrics in Tanzania is still very
low, only about 7.9 meters (1.4 kg) per capita per annum (1974), compared
to 8 8 meters (1.6 kg) for Africa as a whole (excludine South Africa)      and
15.7 meters (2.8 kg), in all developing countries. Actual consumption of
woven fahrirQ since 1966 is reflrcted in Table 2 ehlolw
Table 2
Historical production, consumption and imports of woven fabrics
Total                                           Of which:
Locall   Tmported 7Local     Tmported as                 Dom.est-ic  c.ottor.
Produc-     in     Produc- Finished Fabrics              Consump-     fabrics
Ylear  tiLon     Gray    -ion     Cotton fther Total LLLoL       tion        onl _J
_ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~. _LI        r _U L_L-          t _. _  n _ 
1 KC-   0 r                 0 r     c r c  In C  '7t A            '70 n      C0 C
I 7Ut")'..          -      O.U      J"J.J  IY 7. J  /J .V  -      /0.I j       .J
1967   10.0         -     10.0      30.0  12.0  42.0     -        52.0       40.0
If t n  - .-.n1 r                      c  -1~ -1 1  _ t n  1,     If  A     If1  A
1900 8 3.)          -     3J.J      31. IJ  1L.2  43.   0.4        6./2      6.
1969   53.3         -     53.3      31.6   7.3  38.9    0.5       91.7       84.3
C F 7  ' fl2              I ^1f  -   £1  -  'I   1  I  I  . I     fl%  'b     c 
~1970  60..>       -      0u.2      9.7  1J. 0  2J.    4.4       I7 J       UJ)J
1971   66.2         -     66.2       4.9   9.2   14.1   4.7       75.6       66.4
1972   70.2               70.2       1.0  13.9  14.9    2.0       74.1       60.2
1973   71.7        2.3    74.0      12.9  21.3  34.2    1.8      106.4       85.1
1974   71.8        4.5    76.3       12.5 2L.4  40.7    3.0       114.0      o6.6
(if thie total 1974 woven fabric consumption or 114 million meters, net imports
were 42 million meters at a cost of US$30 million.     learly 70% of imported
fabrics consist of polyester and polyester-cotton biended rabrics for whicn
domestic production capacity is at present limited to one million meters
per annum, or less than 4% of demand.
45.        In addition to fabrics Tanzania imports a variety of diverse
textile articles as underwear, outerwear, blankets, corsets, handkerchiefs,
etc.  The c.i.f. value of these articles in 1973 was Sh 94 million and it
is estimated that these imports account for an additional 0.4 kg of fibre
consumption per capita. The textile import data are summarized below.



ANNEX IV
Page 16
Table 3
Textile imports in millions of Sh; 1971 - 1974
Year      Fabrics      Other Textile Articles      Total
1971         39                  23                  62
1972         49                  24                   73
1973        162                  94                  256
1974 (est.) 213                 109                  312
46.       The historical growth of woven fabric consumption has been very
erratic.  In 1969 total consumption was higher than in the following three
years.  Taking 1966 as a base year, the trend growth rate appears to have
been somewhere between 4 and 5% per annum. One major complication in using
past consumption figures as a basis for the projection of future demand is
that consumption has from time to time been artificially depressed by
quantitative import restrictions. Tanzania's textile marketing authorities
estimate that at current retail price levels the domestic market could
absorb up to 20 million meters more than what is actually available. At
the time of the mission's visit to Tanzania, however, there was no evidence
of serious shortages or of a substantial black market in woven fabrics.
47.       The mission's projections of demand for woven fabrics are presented
in the Statistical Appendix, Tables 3, 4 and 5. Table 3 deals with all
woven fabrics together, Table 4 with cotton fabrics only and Table 5 with
fabrics other than the pure cotton fabrics. These Droiections show two
alternative demand projections, a minimum and a maximum. The minimum is an
extrapolation of historical consumption figures and the maximuim assu!mes
that there was a latent (unsatisfied) demand for 19 million meters in 1974.
In both cases annual demand is nrojecred to grow at A-3-. This is roughly
equal to what appears to have been the trend during the past eight years,
when average npr ranita inncomes grew hv abhout 29Y nor annunm  In view of the
serious economic problems that are being faced by Tanzania at the present
time and the likelihooeid tfhat GNP growth will be slo. inthe imm.ediate
future (mainly because of a sharp deterioration in the country's terms of
trnde) nn annual compound growth rate of 4 .37 for textile consum-pton may be
on the high side. The mission tends to have more faith in the "minimum"
than the  fmavximumlT" projections .
48.       Sever-- conclusions e,merge from the CoL.parilson of Udemand andu
domestic production projections in Tables 3, 4 and 5 of the Statistical
Appendix, The first one is that,the expansion oV ',frT     ±L is aihpiority
and indeed an overdue project.   Expansion of the mill should have been
undertaken severa'L years ago.  Hlowever, if thle projlect Lis iiipi-emienteu in



A XT!.TT7P ITT
Page 17
accordance with current projections and if all the other (smaller) projects
currentLy under implementation are executed without delay, Tanzania may well
have a small net surplus of cotton fabrics production from 1978 (until 1982
~~~~~~~~~~~~_.                        .  . 1  I     .1   . It  I  ^   ..  ..
when the country would again resume net imports). 1/    in case tne  maximum
projections should turn out to be more realistic Tanzania would not reach
a point of self-sufriciency and net import requirements of woven cotton
fabrics would reach a low of 16 million meters in 1978 and 1979.
49.       The picture is very different for the projected demand for and
local production of fabrics other than the pure cotton fabrics (Statistical
Appendix, Table 5). There the proportion of fabrics for which there is
likely to be demand and that could not be economically manufactured in the
countrv (named "essential imports" in the Table) is much higher than in the
case of pure cotton tabrics.   This does, ot course, not mean that the
Government would not have the option to limit or ban those imports if that
is desired. However, there will be substantial demand for cotton-polyester
blended fabrics that could be efficiently made in Tanzania (between 10 and
15 million meters by 1980).
Export Prospects
50.       In the last five years Tanzanian exports of cotton fabrics have
been limited to neighboring Uganda and Kenya and varied between two and
four million meters per annum. At the same time, exports of yarn have been
negligible. With the exception of a few thousand sawrples of lRhanga and
Kitange prints distributed through the Tanzanian embassies in the USA and
Europe, no serious attempt has been inade to explore the export opportunities
for Tanzanian textiles outside Uganda and Kenya. The mission is not
optimistic about large-scale export possibilities for woven cotton fabrics
(or yarn) during the next five-year plan (1975 - 1980) for the following
reasons:
(a)  The productivity of existing mills at present is low and
production costs are too high for successful competition
in international markets. The protective duty on imported
fabrics levied by the EEC and many other net importers is
a serious aggravating factor, but it is not the main obstacle
as things stand at present. The subsidy required to compete
effectively in the international market for Kitange prints
with, e.g., Pakistan or Taiwan would have to be of the order
of 25 to 35% of the ex-factory costs (of MITL) which is the
equivalent of more than 60% of the value of the raw cotton
input. If the cotton farmer would have to bear the cost of
1/   These Droiections take into account that there will alwjavy bh cnmp
demand for specialty fabrics, the local production of which could
not he it-i fiae on prcnomic grounds.



ANNEX IV
Page 18
such a subsidy it is well possible that cotton production
wouild fall1  Before embarking on a large-srale cotton fabric
export strategy, Tanzania's first priority should be to
drastc-,11v raise prodit1ivivty and  lower rost-s- Alsn- a
considerable amount of market and technical research and
development hn   to ha donne rganrdinc quality, styling, pricing
and distribution before any definite plans for export oriented
facilitieso are foriiminfared
(b)  Export opportunities in the East African- rnmmI,niy-v and other
neighboring countries in Africa are likely to be modest.
51.       Uganda traditionally has been an exporter of cotton fabrics
(mostly -to Kenya).  P2D'.centl-y, h-ever, due too political and economic
problems the textile industry in Uganda has been reported to operate at a
fraction of Jts capaciLt. y 1b ut yet in th.e years 19 70=72, 1Uganda exports of
cotton fabrics exceeded imports by 20 million meters.    Kenya has been
.klmpoLi Lng1K LtALxt ile  IAa -Lcs aL a Lrae of '-U LL-Ljon metV ItIeLrLS [rCL dLILuUSII, n 1, L LUU-
ing eight million meters of cotton prints.   The construction of two textile
mills with a total capacLty to produce 22 mlill'on meters pera, jJb iLI bIy 19 7 7I
and 47 million meters by 1980 is under consideration.    It is estimated that
in terims of cotton prints, Kenya wIll be self-suffLcient by 1977 and by then,
only a small proportion of other imported fabrics will be of the type which
can be produced in Tanzania.
52.       Erection of new and/or expansion of existing manufacturing plants
have also been reported in Zaire, Zambia, Sudan, Malawi and Ethiopia. It
appears that most African countries have plans to become self-sufficient
by the end of the decade as far as cotton textile fabrics are concerned. A
possible exception is Miozambique, but the mission has not been able to
gather reliable information on plans for the expansion of the textile
industry in that country.   Also, in some African countries (Zambia, Somalia),
a portion of the textile requirements are being supplied on concessionary
terms by the People's Republic of China eliminating almost completely the
requirements for regular commercial imports.    Consequently, future exports
of Tanzanian cotton fabrics to other African countries are likely to be
limited to occasional sales and opportunities to build a sizable and perma-
rient market in these countries are not envisaged.



ANNEX IV
Page 19
IV. PRIORITIES AND PROSPECTS FOR FUTURE EXPANSION
OF THE TEXTILE INDUSTRY
Priorities for Investment
53.       On the basis of demand and supnlv nrolections (Statistical
Appendix, Tables 3, 4 and 5) the mission concludes that in addition to the
rehabilitation and exDansion of existing mills already under imnlementation -
there is immediate scope for two major textile projects.    The first is an
integrated textile mill with a rapacitv to produce 20 to 30 million meters
of cotton fabrics to meet the growing demand for cotton fabrics by 1978.
The second is an intperated mill with a canarity to produce 20 - 25 million
meters of polyester-cotton blend fabrics.
54.       Due to the limited size of the Tanzanian textile industry, problems
of infrastructure, the shortage of trained personnel, as well as the fact
that spare parts, dyestuffs and chemicals have to be ordered 12 months in
advance, there are a limited number of plant sites suitabDle for integrated
mills. There are definite economic and technical advantages in expanding
e    x ting plants. H*wever , Orta gObe of watCe, el c tr.ic.  p.ow er, as well' as
the Government's policy to decentralize the manufacturing industry, would
eil..-ina-e the three existing textile plants in `thIe Dar es Salz.. ------ as
.L~   ~  L. ii  Lii L  J.L  L.A  i  L.A  -L L±   FJ_(  L.  i  ",CL  ta ,  0)1A±L. IM tL   eaL   as,'
sites for future expansion.
55.       Therefore, on the basis of the mission's review of the sector,
-        C  ~~~L  .A112  A        produIce
the expansion of tlhe m1iill inl P-McILLG to prucaduitiUnai cotton fabrics is
the first priority.   The Government's plan is to double the mill's capacity
and therefore expadid production by about 20 million meters per annum.   The
mission concluded that the existing factory buildings could accommodate an
even bigger expansion project. A 30 million meter project would have the
attraction of adding an additional 10 million meters at relatively low
investment cost (no additional infrastructure would be required) without
increasing management requirements commensurately. At the same time it
would postpone the need for the next integrated cotton textile mill by 18
months to two years if self-sufficiency in woven cotton fabrics is to be
maintained.
56.       In the opinion of the mission the next priority after the expansion
of MTL should not be the establishment of another large fully integrated
cotton fabrics mill (as appears to be the Government's plan) but the
establishment of an integrated mill to produce polyester-cotton blended
fabrics, which should be built as soon as the availability of finance and
manpower permit. Arusha's Kiltex plant which is about to start limited
production of polyester-cotton fabrics seems to be a logical site for such
a project. The existing factory building could accommodate expansion from
the present one million meter per annum production capacity to about seven
million meters. There is, however, need for an expansion project beyond
seven million meters. Domestic demand for polyester-cotton blended suiting
and shirting fabrics that could be made efficiently in Tanzania is estimated
at 10 - 15 million meters by 1980.



Page 20
57.       It is perhaps ironic that Tanzania probably has a greater compara-
tive advantage in the production of cotton-polyester blended fabrics (based
on local cotton and imported polyester fibre) than in pure cotton fabrics.
Tne main reason for this is that Tanzanian AR grade cotton is of a type that
is technically ideally suited for the manufacturing of fine blended combed
fabrics. This type of cotton is available in limited quantities only in
some parts of the world (Egypt, Sudan, Peru, Southwest USA).
58.       The potential foreign exchange savings associated with a polyester-
cotton blended fabric project is interesting. 'Jn average the landed cost
in Dar es Salaam (excluding duties and taxes) of standard 65/35 polyester-
cotton fabric in 1974 was US$1.00 per meter. In other words, a 10 million
meter project would substitute USS10 million worth of imports per annum.
The annual foreign exchange costs of operating the factory would be about
US$7 million - $1.8 million for polyester fibre, plus S700,000 reduced
cotton export revenues (assuming a price of $0.50 per lb. of AR grade) plus
$700,000 for imported dves, chemicals, spare parts and other inputs, plus
$200,000 expatriate salaries and benefits plus S3.5 million for interest
and amortization of foreign loans used to finance the project.     The foreign
exchlange savings associated with a 10 million meter cotton textile import
substitution project would be less. Furthermore, it is quite possible that -
because of the type of cotton grown in the country - Tanzania could manu-
facture fine blended combed fabrics at an internationally competitive cost
level.
59.       Hence, the mission recommends that the Government should consider
a sizable (say 20-25 million meter p.a.) polyester-cotton blended fabric
project as the next priority following the Mwanza expansion project. If
the project is sited in Arusha, advantage could be taken of existing infra-
structure, spare capacity of existing machinery, and local experience in the
manufacturing of such fabrics. The Government's priority appears to be for
the construction of a large new integrated cotton textile mill in Musoma.
There is at present no infrastructure in Musoma to serve the proiect. There-
fore investment capital requirements would be very high and this would come
at a time that Tanzania's financial resources are already stretched to the
limit.  On the other hand, siting a major project in Musoma would bring
development and employment opportunities to an area that lhas in the past been
rather neglected.
60.       The setting of investment priorities in Tanzania is ultimately the
resoonsibilitv of the Economic Committee of the Cabinet.    F.onomie consider-
ation appears to weigh in favor of an Arusha based blended fabric project,
hl-t this rqntiirps n morp dptniled analyqiq thnn whnt i.s nrP.:Pnt-Pd in thic
Annex. To clarify the issues and to prepare the more detailed analysis
req…ired the mission suggests that, os nart of the 4wan7a exvnsr%cion proiect,
the Government urgently undertakes a study of the domestic and export market
,-,rrna c' f-c  fZr.  nf-, t r,,  mrnA      Fn1, i- tr,,.tr4 ,.r ~-.c~ A  t-h~ ~  +  - A
prnefcits asorciate  with pot estericottus en ativs and e he costs and
benefits associated withi the various alternative development strategies
outlined inP this chapter.



ANNEX IV
Page 21
Constraints on Development of the Textile Sector
61.       The principal constraint is a pervasive shortage of qualified and
experienced Tanzanian managers.  The easiest and quickest way to alleviate
this constraint would be to stretch the timetable for the Tanzanianization
of senior technical and manazerial nositions and iiue more expnatriates in
the meantime. To prevent such action from becoming a permanent feature of
industrial life in Tanzania- the Government shouild give t-nn priority tn
on-the-job training and link every important expatriate appointment and
earh management contract to the execritinn nf an effective trair4ng program.
TEXCO is responsible for the overall supervision of all major textile mills
in the rcountry as Tweoll n  tho imnnrt  drtibtoF-,n  nd maktIn
products by NATEX. This is a major task in itself. On top of it TEXCO is
responsible for the planning and supervision of all expansion plans including
the Mwanza project. Together these tasks will fully occupy TEXCO's available
managemrent cnapac4iy.  An- furt'.er ma4or new project wouAl require a strengthen=
*   .  L.       t'J   IiV JS.LJ  ~L L  i  LU  A. tij-L~  "LLL
ing of TEXCO lest its manpower resources become too thinly spread for effec-
tiv  control-
62.     Th1e second -a4-- costanti a financial one. TFXOs own
.4 ITo  nnnrfll~~~~~~~~~~~~~~~~~~~-   - J L  _~  .~
financial resources, generated through the cash flow of its subsidiaries,
_are very 14mlteA anday.ao Ae      proec    reuie    the- iJec-4- of new
~  V ~  ~ A.i~~  ~   L.y  -tiJW IA. LL-  F-~Jt _1L L  £  -LiI   £ LJC  L.LkUIL  UlJA  netw
equity and loan capital.  The cost of the Mwanza expansion project is
estimated at US$44.3mTT A.  mil l4on (US$66. mTCllion:  i  the en.anon wc hte b
*~ J   -L.&4.LU  "U.JyOu   .J  IL L LL±IL  Li I lit! UA1JdLLIS1U11 WUU£U(  I)e  I))
30 million meters instead of 20).  The World Bank is likely to be a financial
partner in this proJect.  I'LLe *Y1uusoma proJect kcapacity 25 million meters) is
estimated to cost US$70 million (including infrastructure). A 20 million
meter polyester-cotton blended fabric plant in Arusha is estimated to require
about US$45 million capital resources. In all, investment requirements of
the textile sector during the next five-year plan are estimated at somewhere
between US$90 million and US$140 million depending on the choice of strategy.



STATISTICAL APPENDTX
TO ANNEX IV
LIST OF T'ART.PS
TABLE 1      Imports of Woven Fabrics
TABLE 2      Woven Fabrics Production, Consumption, Imports and Exports, 1970 - 74
TABLE 3      Projected Woven Fabrics Production, Consumption, Imports and Exports
TABLE 4      Projected Cotton Fabric Production, Consumption, Imports and Exports
TABLE 5      Projected Requirements of Fabrics other than Pure Cotton Fabrics
TABLE 6      Subsidiary and Associate Companies of Texco
TABLE 7      Production and Consumption of Cotton Yarn
TABLE 8      Production of Woven Fabrics by Manufacturing Units, 1968 - 1973
TABLE 9      Converting Capacity (per Mill)
TABLE 10     Converting Capacity and Production (By Function)
TABLE 11     Cotton Crop
TABLE 12     Prices of Selected Cotton Grades
TABLE 13     Comparison of Average Labor Costs per Unit of Production in Spinning
and 'Weaving, Tanzania and U.S.A.
TABLE 14     Trading Activities of Natex
TABLE 15     Domestic Price Structure of Typical Printed Fabrics
TABLE 16     Imports of Fabrics and Textiles by Country of Origin
TABLE 17     Mill Margin - Woven Fabrics
TABLE 18     Wholesale Selling Price - Kitange
TABLE 19     Ex-Factory Selling Prices of Woven Fabrics
TABLE 20     Prices of Carded Cotton Yarn
TABLE 21     Import Duties for Textile Fabrics
TABLE 22     Average Wages in Textile Industries of Selected Countries, 1974



TABLE 1
IMPORTS OF WOVEN FABRICS
(In million linear meters)
Year                   1970    1971    1972    1973    197h
RB NATRY                3.8     3.3     3.7    17.h    2h.3
Byr Garmont.
Manufacturers       19.7     0.8    11.2    19.1    21.1
TOTAL         28.5    2h.1    1h.9    36.5    h5.4
Source: National Textile Corporation



TABLE 2
WODVE FABRICS PRODUCTION  COINSUXPTION, IMPORTS AiMf EXPORTs17-74
tIn xrrllion 1inear Meters                 7
Imported as                                                  Apparent
Imported  Total Local.   Finished Fabrics                Available for  PopulaLtiorn   Consumption 2/
Year   Production   in  r    Production  -Cotton  Other   Total    Export   Home Market       ilion) _ p    er capita
197'0     60.2         -        60.2      9.7     13.3    23.5     4W.4         79.3         12.6            6.3
1071      66.2         -        66.2      4.9      9.2    ].1       4.7         75.6         13.2            5.8
1972      70.2         -        70.2      1.0     13.9    14.9      2.0         74.1         13.6            5.5
1913      71.7        2.3       7L.0     12.9     21.:3   34,.2     1.8        106.4        14.0            7.6,
1971,     71.8        b.5        76.3    12.5     28.LI   40.9      3.0          L4.o       14.4            7.9
Source: National Textile Corporation



TABLE3
PROJEC'TED 'WOVEN FABRICS PRODUCTION. CONSUMPTION, IMPORTS AND EXPORTS
(ln million linear meters)
Local      Total Niet    Essential    Imports (Exports)    Populat.ion    Consumption
Yeaa    Consumption    Production     I;mports 7/   Imports 8/      Balance    _2     QlUilin)    per C:apita
C             D               E                 F              G
Min,2_  Max,/               Min.    Max.                Min.        Max.                  Min.      Max
197 1! 106)     128         74       32     54         17        15          37        14.0        7.6      9.1
1974 1/ 114     133        '76       38     57        16         22          41        14.4        7.9      9.2
1975      16   139        85 L/     31     54        17        13           37        14.8        71.9     9.4
1976)    121    145        9R3        28    52         18        10          32        15.2        8.o0     9.5
1977     127    151       1 02       25     49        19          6          30        15.6        8.1      9.7
197E8    13 2   157       112 °/     20     45         19         1          26        16.o        8.2      9.8
1979     137    164       117        20     47         21        (1)         26        16.5        8 - 3    9.9
198c)    144    171       1:22       22     49         21         1          28        17.0        8.4     110.0
1981     15(    179       122        28     57         22         6          35        17.4        8.6     110.2
1982t    156    186       122        34     64         22        12          42        18.o        8 .7    10.3
1/ Actual
2/  Pro,jections based on the apparent consumption in 1974 and on annual growth rate! of 4.3%, thereafter.
3/ Projections based orl the estimalted demand in 1977 and on annual growth rate of 4.3% thereaf'ter.
4/ Cotton fabrics capacity of 84 million meters pluas 1 million meters blended fabrics capacity startilg
from 1975
5   CapaLcity of present mil:Ls alt attainable productivity plus minor expansions already approved in progress.
Mwanza exparLsiorn at 50, 75 and full capacity in 1973, 1979 and 1980 respectively.
7/ Allcwing for ex)ort of about 2 mill:ion meters ini both 1973 and 1974 (i.e. apparent consumption plus a
national 22 rillion meters in 1973 and 19 million meters in 1974 being TEXCQ's estimates for unsatisfied
or latent demand in those years)
8/ Fabrics which cannot be made in Tanzania.
9/ E = A - (B + D)



TABLE 4
PROJECTED COTTON FABRIC PRODUCTION, CONSUMPTION,
IMPORTS AND EXPORTS
(In million linear meters)
Local       Total Net Imports,, Essential      Import (Export)
Demand      Production         (Exports)     t/  Imports L/      Balance       d'
A            B                  C                D              E
Year      Min. 2/   Max. 3/            E n.          Max.                 Min.        Max.
1973 ./    85       103       7h        11             29         3        8           26
1974 1/    87       107      76         11             31         2        9           29
1975       92       112      84          8             28         3        5           25
1976       96       116       92          4            24         3        1            21
1977      101       121     101           0            20         3       (3)          17
1978      105       1 27    111 i/       (6)           16         3       (9)          13
1979      109       132     116          (7)           16        II      (11)           12
1980      114       138     121          (7)           17         4      (61)          1 3
1981      119       1lIL    121          (2)           23 1               (6)          19
1982      124       150     121           3            29         4       (1)           25
1/ Actu<1
2/  Projections based on the apparent consumption in 1974 and on annual growth
rte+    of 1. 1t +herenf An: -Ov 
i/ Projections based on the estimated demand in 1974 (i.e. apparent consumption
iRm1      lrw   --~ -      0    ,,-A C' A.-,---   4- rs J 4-h ljQ71. 1-n,
luS    s a notion' 1 A  '.I 18J ; 1;r LItes i 019 and rlO r;.4 i I Jon m,,tes &  197'4 beV.g.L_
TEXCOTs estimate for unsatisfied or latent demand in those years)
/  Cpact- y o' p. sent U .;  at .n -                     plu .d JLor- --pIs --i--.L
already approved and in progress.
ti   -           I…L     '  '7,  ~_A                      In 70 1r7 O   it -,-~  -34n
H/  o'WAs - dt:pans->l on a- v [) 61u         PaULLlLUYi t;yo; 11 17(U) Iy[7 aslu 1vUU
respectively.
£  ,' A ...                    I -.- 0-.D  -11.1-       AL~L   e4%7.  -J  4CVn7I
U!W Au-i           LWz.AV.U U.L of 2U4..LLUon  Ot:re-0 iLn L5U  1 7  ard 14 97.
7/ Fabrics which cannot be made in Tanzania.
LE   A _   (n
ID'   It 11  k -r  1U



TABLE 5
PROJECTED REQUIREMENTS OF FABRICS .L
OTHER THAN PURE COTTON FABRICS
(In million linear meters)
Local       Total Net    Essential 5   Import (Export)6/
Year        Demand      Production     imports      imports         Balance
A              B            C             D              E
M_.    Max.                 Min.    Max.                Min.     Max.
1973       21     25        _          21     25      14            7      11
I9y4-'    z74, 2°2   ,      -          27     26      14           13      12
1975      24 h    27        1          23     26      14            9      12
1976      25      29        1          24     28      15            9      13
1977      26      30        1          25     29      16            9      13
1978      27      30        1          26     29      16           10      13
1979      28      32        1          27     31      17           10      14
1980      30      33        1          29     32      17           12      15
1981      31      35        1          30     34      18           12      16
1982       32     36        1          31     35      18           13      17
1/ Including all synthetic fabrics, blended fabrics and woolen fabrics.
2/ Actual
2/ Projections based on the apparent consumption in 1974 and on annual
growth rate of 4.3% thereafter.
1a/ Projections based on the estimated demand in 1974 and on annual growth
rate of 4.3% thereafter.
5/ Fabrics which cannot be produced locally for technical or economic
reasons.
6/ E = A - (B + D)



TABLE 6
DUD," lAna aJUNi ROOVUJI utUWALZO uV IEXAO
(as of November 1974)
Estimated
1974 Production
Share Capital       % of Shares   (in mil-lion meters
Company               in Million Shillings  Owned by Texco      of fabrics)
1. National Textile
Industries CorD.Ltd.
(Natex)                          10                100       Marketinc Company
2. Friendship Textile
Mill LtdL                        30                100        26 Million
3.  KilimAninrn Tpytilp
Corp Ltd.                        26.4                57       21 Million
4. Mwanza Textiles Ltd.                20                  40       23 Million
5.  Tanganyika Dying and
Weaving Mills T.A                 20                 51       13 Million
6. -  nTket  Manuf f     s Tt                                       1 2  33  1,500 bl&nke+s
7. East African Kenaf
Industries Ltd.                  23                 100       2,700 kenaf bags
8. Tanzania Bag Corp. Ltd.               7.5               60       3,600 sisal bags
1/ National Textile Corporation



TABLLI
PRODUCTION AND CONSUMPTION OF CWTTON YKRN
(n vlogramsT
PRODUCTION       PURCHASES      SALES TO               TOT'AL
KElL                          1973          EX F.T.M.    MILLS & KNITTERS       CONSUMPTION
1.  Friendship Textile Mill            4,842,102          -          1,017,882            3,824,254
2.  Mwanza Text:iles                  2,830,880        2'6,000           -                3,046,880
3.  Surguratex                        1,114,381           -              _                1,01h,381
4. Kiltex Dar/Aru]7a                  2,608,274         85,000           -                2,693,274
5. Moshi Texti:Les-.                      -            112,000           -                  112,000
6. E. A. Kenaf Industries                 -             18,000           -                   18,000
7. Standard Knit Factay     /             -             22,600           -                   22,600
8. Tanganyika Text-ileel                  -            184,000           -                  184,000
9.  Tanzania Knitwear1                    -             95,000            -                  95,000
1O. SunfLag (T) Ltdll                      -            121,000            -                 121,000
11.  Calico Textiles,'/                    -              38,500           _                  38,,500
12. Tanzania Hoisiery/Others.!             -             18,645            _                  18,645
13. Export (Kenya)                         -            107,143
TOTAL            11,295,677      1,017,888       1,017,888           11,295,677
-…~~~~~~~~~~~--
l/   Private knittirn miills.
2/   Privrate weaving mil's.



TABLE 8
PRiODUCTION OF WOVEN FABRICS BY MANUFACTURING UNITS 1968 I  15
t1zmilio2    i ear metrs )
MILLS                     15,68      1906       1970      1971       1972        19za
Friendship Textile Mill,          1l.7      12.,3      15. 7     21.0       21.4        23.5
Mwanza Textile Mill                -         7.,7      12.3      15.5       18.2        20.0
Kiltex (Dar)                     11.2       13.,3      12.0      12.6       13.4        10.8
Kiltex (Aru)                      5;.O       5..5       5 .9     14.3        5.3         4.4
Sunguratex                        8.9       10.6       10.5       8.b        8.3         9.1
Tanganyika Textiles, 1/           2.9        2.9        2.9       2.6        2.5         2.5
Calico Textile Mill               0 0.8      0.9        1.(       0.9        1.1         1.4
TOTAL       331.5      53.2       60o.3     66.3       70.2        71.7
1/ private weaving mills



CONVERTING CAPACITY (PER NILL)
(In rillion linear meters)
1973                      1980
PRINTING   DYEING       PRINTING   DYEING
KILTEX             12          5.5         12.0        9.5
SUNGURATEX         10.5        3.7         17.5        3.7
FRIENDSHIP          8.5       10.0         12.5       10.0
MWANZA             19.0        7.5         42.5       10.0
7.'  i r%  L.7          PE. if



TABLE 1 0
CONVERTING CAPACITY AND PRODUCTION (BY FUNCTION)
(In million linear meters)
1980
CAPACITY       PRODUCTION      CAPACITY     PRODUCTION
Printing                 49            38l/           84            63
Piece-Dyeing             27            20             33            34
2/
Yarn-Dyeing               h             4 -            6              5
Grey & Bleaching                       12                            20
80            7h             123           122
~/  Including 2.3 million meters of imported grey.
2/   Two small private mills



T ART.'. i i
COTTON CROP
In thousancsof bales X
Year        Total       Used by Domestic Industry    Exported
1958         169                                         168
1959         203                                         195
1960         189                                         187
1961         168                                         171
1962         21h                                         200
1963         263                                         259
196L         293                                         295
1965         369                                         363
1966         936                   13                    h23
1967         N.A.                  N.A.                 N.A.
1968         283                   30                    253
19(9          386                  hJt                   3h2
1970         420                   53                    3h9
1971         3A6                   58                    226
1972          423                  60                    367
1071         )30                   62                    368
1974  / "     00                   63                    337
aJ.L 8 sk. per -bal
! s U4- S r.+ 



TABLE 12
(October, 1974)
GRADE                SLTAPrLE LENGIUiCF
Mwanza AR No. 1               1 1/16             54.50          52.0
Memphis SM                    1 1/16             54.40
California DPL                1 1/16             51.70
Texas Middling                1                  49.65
Orlean Texas SLM              15/16              47.15          36.0
Punjab AC 134                 15/16              47.00          42.0
1/ North European Port in US cents per lb.
2/ Country of origin



TABLE 1 3
COMPARISON OF AVERAGE LABOR COSTS PER HOUR AND PER UNIT OF
PRODUCTION IN SPINNING AND WEAVING, TANZANIA AND U.S.A..
1969 and 1974
1969                        2194
TANZANIA     U.S.A.        TANZANIA     U.S.A.
Average Wage/Hour
in TT A 4
fringe benefits          33.3       310.0          41.4        424.o
e D13ThTT1TV'-
ligs. of' 20c cc.
produced per man hour     2.7        17.9           2.3         20.1
Labor cost per kg.
in US                    12.3       17.3           17.9         21.0
WlEAV XING
Thousand meters of
Weft inserted per man-
hour                     19.0       156.0          13.9        175.o
Labor cost per thousand
meters of Weft inserted
in UvS 0                  1.8         2.0           2.9          2.h
i/ Based on 1836 picks per meter and average width of fabric 1.11 m.



TABLE 1 h
,DLAnTIr Arl CTTITE:S O .A. ATEX
(In Tsh million)
SALES OF                       SALES OF IMPORTED    TOTAL    EXPORT i/
I15Al inruR*D        ~       IVUVfl6  TTIC OO6 AL TTT  u A   .   Ar P`
1971                  71              105n                -            176       37
1972                 103              i52-                             271       22
1973                 i85-             360               i5             5i
1974                 329              470               15             814       32
j/ Not including Kiltex and Friendship Textile Mill
/ Included in Total Sales.



TABLE 15
DOMESTIC PRICE STRUCTURE OF TYPICAL PRINTED FABRICS
(r~,          .
(Tali Ta- ma+w   I 
% --^   k,v   ..- __
EX-FACTORY EX-FACTORY    EXCISE  SALES   COST     NATEX    SELLING PRICE RETAIL
PABT2D1/     rCr        PRPICE     nTJTY   TAY  TO NATEX WHOLESALE  SUB-WHOLESALE  PRICE
KITANGE      5.45       5.20      0.35     1.45   7.00      7.15        7.55      8.30
KHANGA       4.44       5.84      0.35     1.31   7.50     10.10       10.60     11.67
i/ Mwanza Textiles Limited



MA nTt LIA1
I ADLIL, I C?
TMPnRTS OP FAARTCS ANn TFYTTT.R^ PY r.nrT.TRY OF ORTIGT
(As a percentage of total)
1970     1971      1972      1973      1974A/
China     25.0     43.0     28.5      51.6      40.0
Japan     32.0     21.0     18.8     N.A.
Kenya      2.6      2.6     25.1      N.A.
Hongkong   6.5     11.0     10.5      N.A.
India      7.7      3.0     N.A.      N.A.
Others    26.2     29.3     17.1      48.4     60.0
Total  100.0    100.0    100.0     100.0      100.0



TABLE 17
MTT.T. MAWRT.TW 1/ _W(WVT , F.ARTRfl.
(per meter of fabric in US $)
' AnnI T                         TTQA         MI.TA1d7A rPSVrTTTVCQ T'Pn.
Gray Sheeting                         .17                 .22
Dved Linen                            .28                 .45
Denim                                .22                  .31
Khanga                               .35                   5°
Kitange                              .38                  .61
Twill                                 .33                 *53
Supertwill                           .54                  .97
Ponlin/Dreas Prints                  .27                   L6
Average            .32                  5°
1/ Difference between the ex-factory cost and the value of the
raw matero i ol (cot10n).
2/E+jvnated costsc in 1074.



TABLE 18
INTERNATIONAL PRICE COMPARISON
(Price in US$ per linear meter)
Ex-Mwanza Textile Mill-/           0.76
Ex-USA-/                           0.64
Ex-Taiwar2/                        0.62
Ex-Pakistan-/                      0.55
Ex-Hongkon- 2/                      .63
1/  Ex-factorv cost (Axcluding indirect taxes and subsidies
2/ Handed nricA Dar es Salaam (excluding imnort dutv and
sales tax)



TABLE 1 9
EX-FACTORY SELLING PRICES OF WOVEN FABRICS
(In US$ per meter)
Fabric                    in U.S.A.       Mwanza TextilesLtd.3/
White sheetings              0.35                0.46
Combed twill                 0.80                0.83
Khanga3/                     0.47                0.81
White poplin                 0.37                0.68
Deyed denim                  0.41                0.50
Kitange                      0.58                0.75
1/ January 1975 prices
2/  October 1974 prices, excluding Sales Tax and Excise Duty
/   The average price for 35% roller prints, 35% sereen prints
and 30% discharge (screen) prints.



TABLE 20
PRICES OF CARDwu COTTON YARN
(In US 0 per lb.)
TANZANIA      WESTERN EUROPE      UoS.A.
Mill Margin-/            46.5             36.5            40.0
Selling Price-          117.0            103.5           105.0
CIF European Port-
Duty Paid             137.0o'
I / Differer, Ce n-t  n +    ,th.e ex=pf+o,y C08+ of pr ouAi,ng 1 lb.
of yarn} 20 cotton count, and the value of the raw material
L/     ULJJPUV  714  LL  I.;UAAIiSj U.L   UL.Lrce1 nts,  a.LAOVL dv
- '/  1....4 I   TTO  ---4..  U1'T  23-. -   -7d
2'   .LtLI   I I  VUU jILLO  rwkLI UUL.3  fpo



TMPnPT nTrRIES FOR TErYTT.r PA I 1T
A                     B
SU-4 lings Per Pg. M.    AA Valore..
hi  *,vu  hi%  *  C.*  j . Ot   * a..IA,/ V.,,
Gray and Bleached               2.50                45
Drills and Twills               3.80                45
Prints                                              30
Others                          3.00                45
j/ The duty is either ad valorem or specific, whichever is
the greater



TABLE 22
AVERAGE WAGES IN TEXTILE INDUSTRIES CF SELECTED
t%TO'sTTS. 1 97 ^-
(In uv  per nour incLuaing fringe beneiLts)
Tanzania                   0.41
Taiwan                     0.23
South Korea                0.11
Colombia                   0.25
Pakistan                   0.224
USA                        4. 24