In Tanzania, the wood and furniture industry comprise categories such as sawmilling and planning of wood, veneer sheets and wood-based panels, builders’ carpentry and joinery, wooden containers, other wood products, and furniture.
This is an extract from a white paper published by the International Growth Centre, titled “Horticulture, and wood and furniture industries in Tanzania: Performance, challenges and potential policy approaches”.
The Tanzanian economy today remains predominantly agrarian, with 66% of the workforce in agriculture and 30% of value added produced in this sector. As in many countries in the region, industrialization came to a halt at the end of the 1980s. Premature deindustrialization destroyed manufacturing jobs, moving workers into traditional services. Today, the services sector is the largest contributor to value added, with a share of 38% of GDP. While the share of industry has increased substantially since the early 2000s, manufacturing continues to play only a minor role, contributing to 6% of total value added.
In the last decade, export growth rates have been rather erratic, with peaks of 26% in 2007 and 23% in 2015, and negative growth in 2016 and 2017. Not only have exports not grown fast enough, their composition has also changed little, and today simple commodities make up for a rather undiversified export basket.
In 2016, the wood and furniture industry employed roughly 8,000 workers, representing 6% of total manufacturing employment. Since 2008, the industry has grown 2.5 times in terms of employment. Its value added was estimated at $110 million, or 4% of total manufacturing value added. Labour productivity is also low, and lower than in furniture-making establishments in countries at a similar level of development, such as Vietnam. As a result, average wages in the sector remain low, although, particularly in urban areas, they are reportedly above the estimated food and basic needs poverty lines. In comparative terms, the Tanzanian wood and furniture industry has great growth potential. In Vietnam, the same industry employed roughly 500,000 workers in 2016, producing over $3 billion in value added.
Exports of wood products and furniture are negligible in Tanzania, whose trade balance in these product categories has been in deficit for over a decade according to UN COMTRADE data.13 Goods with export earnings above $1 million are wood marquetry and inlaid wood, and other furniture and parts thereof.14 Tanzania also used to export logs, but the government has banned logs export since 2006, in a failed attempt to stimulate local processing of wood. The largest part of the Tanzanian production in this sector goes therefore to domestic consumption.
Wood and furniture production is one of Tanzania’s oldest industries, with the first sawmills being established in the late 1950s and early 1960s. Furniture companies were nationalized in the 1960s and later, during the privatization wave of the 1990s, returned to the private sector. Liberalization facilitated the entry of furniture importers in the country. In recent years, the distinction between local manufacturers and importers has become blurred, with some importers having started to manufacture locally and some sawmills importing furniture to complement what they themselves produce. Today, the main product categories of this industry are wood and metal household and office furniture; garden furniture made from tropical hardwoods; and handmade, general furniture made by hand from tropical hardwoods.
Except for some relatively large firms which import and manufacture furniture for the domestic market, the majority of wood products and furniture producers are small and medium-sized enterprises (SMEs) located in clusters, such as the Keko and Buguruni-Malapa clusters in Dar es Salaam. Firms in clusters are predominantly informal micro-enterprises and SMEs working with a small number of regular employees and employing dated technology and hand tools. Their scale and low technological profile severely hinder their ability to increase production scope and improve quality, thereby hindering their opportunities to upgrade in global and regional value chains. Approximately 90% of firms in the sector are locally owned and predominantly supply the domestic market, with domestic sales estimated at over 95% of total sales.
Plantations and other woodlots supply logs to wood processors and to traders, who may sell on the domestic market or export unprocessed logs. Logging activities are small-scale and carried out with old technology, resulting in low harvesting recovery rates. The wood products and furniture industry is a relatively minor consumer of processed domestic wood. While the bulk of wood consumption is generally devoted to household fuel wood use, the industrial consumption of processed wood is dominated by the construction industry.
Wood processors that supply timber to the construction sector and to wood and furniture manufacturing firms are, for the most part, small entrepreneurs employing mobile sawmills with low recovery rates and producing low quality timber. With dispersed and small woodlots, mobile millers are currently the only actors able to process wood profitably and are therefore a key outlet for small tree growers. The poor quality and limited supply of domestic timber, which contributes to make Tanzania a net importer of semi-processed wood, is recognised as an important bottleneck for the further development of the wood and furniture industry.
Source: ZEF
