UNLESS there is a transformation in the mode in which general education and entrepreneurship training is conveyed, building a Tanzanian middle class, ready to engage in economic activities that will sustain long-term economic growth, is going to be a tall order.
What I am making an effort to assert here, is that continued faster economy growth, to be sustained need to centre on technical schools and training.
Weak middle class can overtime contribute to stagnant or falling incomes and also may contribute to the costs of life’s necessities to continue to increase, and hence causes the risks of falling to begin to propagate.
Economically, the faintness of unhinged middle class economy society is a problem not just for those who are besieged but also for all Tanzanians because a strong middle class is important and crucial for a vibrant, not only for democracy, but for a healthy economy whose target is to spread income to many.
Today’s contribution doesn’t intend to tackle every issue of concern to the middle class or lecture on every problem that might be caused by weak middle class in a given economy, rather, it centres on the central issues that I believe for the future of our nation to increase and broadens tax base, warranting there is a robust middle class is very important.
Strong job prospects, on one hand, not only help to reduce costs and lowering risks, but provide strong base for the ability for people to pay for middle class basics such as health care, retirement, housing, and meet institution education for their children especially in the evolving digital and very competitive economy on the other.
Why is action needed in the manner young people are trained today as compared to three decades ago? I am of the opinion that most forward looking policy makers and certain forward thinking leaders see the answer to that question every day. But what they see is also reflected in numbers. African development bank (AFDB), one of most respected financial institution indicates that the 2020 projected GDP growth of Eastern African countries is poised to grow faster due to major infrastructure creation taking place in some countries.
For instance, examining AFDB data and reports indicates that despite Covid-19, Tanzania when compared to 13 countries had the highest projected gross domestic product in the eastern part of Africa. Comoros and Burundi (3 per cent), Somalia (3.2), Seychelles (3.3 per cent), Eritrea (3.9 per cent), Kenya (6 per cent) Uganda (6.2 per cent), Tanzania (6.4 per cent), Ethiopia (7.2 per cent), Southern Sudan (7.4 per cent) and Rwanda had (8 per cent). It is only Sudan, the data analysis revels that had negative projection (-6 per cent).
During the Covid-19 pic, projected GDP growth for the same region shows that 6 countries will experience negative GDP growth, while seven counties projected to have positive growth GDP, amongst them, Tanzania projected to lead the GDP growth rally with 5.2 per cent, ahead of Uganda, Rwanda, Ethiopia, Eritrea, and Djibouti. In an overall, the region’s economic growth in my opinion, based on AFDB projections, remain robust amid emerging challenges caused by Covid-19.
In order to preserve and put up with such growth, in my judgment, there is a need to build a strong base that will warrant sustainability of projected GDP growth. This to be attained, there is a need to begin provide an enabling infrastructure that would help to create widespread middle class. Strong middle class has many advantages include but not limited jobs creation opportunities and delivery of more economic undertakings.
In order for Tanzania to keep up and maintains its position as one of the fastest growth economy within EA, there is a need in my view to re-examines policy areas that could in longer term help to deliver the middle calls needed to cope with middle income status the country attained recently. Policies that I am of the opinion could bear fruits to strengthen Tanzania middle class will need to include the following areas.
One, the way cost of training are managed. In my assessment, take down school costs for middle-class families would help to change the way training institutions especially technical training schools do business while also making it easier for people to finance education. Adopting this strategy alone would in my opinion help make practical training schools more efficient by creating incentives for these institutions to keep costs down will foster cost-based competition between schools, and this will encourage colleges to give training and other non-traditional, less-expensive ways of learning to help impart skills relevant to today’s market need.
Two, devise mechanisms to help reduce costs and barriers to job training. Employment training programmes especially practical skills are critically important for making sure Tanzanian future workforce have skills that employer’s value. Regrettably, disguised high costs and other hurdles have restricted access to these programmes for many Tanzanians, especially those with less education who could benefit the most and hence widen middle class segment.
Three, nurturing workplace standards particularly as all rely on economic impact of emerging SMEs industrialist in most emerging value chains such as packaging, service and logistics etc. To aid boost incomes amongst many Tanzanians, workplace especially small factories standards need to be strengthened and updated to give employees a solid wage floor to negotiate from and gears to help capture a reasonable share of the economic gains they help produce.
To support workforces do well when companies do well, there is a need to increase the use of broad-based fiscal incentive through radical measures to allow employees and workers join come together, make the government a better purchaser, and start to link employee compensation to CEO compensation especially for state owned enterprises.
Fourthly, to boost and sustains middle income class, there is a need to revisit existing options on retirement security especially to SMEs industrialist champions. SMEs play a major role in most economies, predominantly in developing countries and this contribution can be enhanced when a country attain middle income status. SMEs account for the bulk of businesses and undoubtedly are important contributors to job creation and tax contributors to the government and hence country’s economic development.
In my opinion, as far as retirement security for most SMEs is concerned, I stand to be corrected; our private retirement system is inadequate. Based on sampled SMEs selected and studied in an interview carried out on 7th July 2020, that participated in the 44th international trade fair (DITF) for 2020, point toward direction that most businesspersons in this critical segments of the economy, especially employers don’t have a stepping down plan at work, and many of those who do are not on track to save enough for retirement in large part because most plans have high costs and are ineffective.
To sustain a middle income status and sustain middle class, there is a need to ensure that everyone has more and better options to save for retirement to cope with benefits brought by middle class led economy.
Thus, there is a need or recommend creating a new kind of retirement plan that is more efficient and more secure than basic plans if seen appropriate for SMEs segment.
For Tanzania to sustain fastest growth and create middle class led economy; the private sector has to be provided with palatable fiscal incentives to help them creates more jobs. Many don’t get it, but creating enough jobs to return our economy to full employment especially after Covid-19 threat is critical.
Stimulating the kind of job creation the economy needs will need bold fiscal actions that will boost demand side as well as more direct radical fiscal interventions to jumpstart supply side especially within agricultural sector and its value chain. Direct involvements to create jobs opportunities should build on existing strengthened infrastructure and incentivize businesses working environment to make industrialist do more to create opportunities.
The destabilized state of the middle class is conceivably the single most main issue facing policymakers today. The dwindling of the middle class damages not just those who are struggling but also all Tanzanians because a strong middle class in my judgment is critical for a vibrant social equality and in good physical shape economy like Tanzania.