Tanzania Is Growing at 6.1%. Why Are Good Jobs Lagging?

Tanzania is projected to grow by 6.1% in 2026 and by an average of 6.5% over the medium term, while inflation remains within the Bank of Tanzania’s target range and public debt stands at about 49% of GDP. On those numbers, Tanzania looks like one of Africa’s more stable growth stories. The new World Bank Tanzania Economic Update: Making Jobs Work argues that the harder economic question now sits underneath the GDP number. Nearly 69% of working age Tanzanians are already employed, one of the highest employment ratios globally, yet median hourly earnings are only TZS 1,005 and most workers remain concentrated in low productivity activities. Tanzania therefore has a labour market in which work is common but productive work is scarce. The contrast is unusually sharp. Tanzania’s economy expanded by 5.9% in 2025, with public spending accounting for more than two thirds of real GDP growth and services such as finance, trade and transport providing nearly half of sectoral growth. The World Bank expects growth to accelerate further in 2026. Yet the same report estimates that poverty at the $4.20 a day line has barely moved, from 70% in 2018 to an estimated 69.8% in 2026, while average real private consumption per person grew by only 0.2% a year between 2018 and 2025. Tanzania has therefore produced sustained aggregate growth without an equivalent increase in household welfare. The jobs data explain a large part of that divergence. A country does not become substantially richer because more people are economically active. It becomes richer when workers produce more value per hour, firms invest in better machinery and technology, businesses expand into higher value activities and labour moves from subsistence and survival activities into work that supports higher earnings. Tanzania’s next development problem is increasingly located inside this productivity transition. Does Tanzania Actually Have a Jobs Shortage? The World Bank’s answer is largely no. Tanzania’s employment to population ratio reached 68.7% in 2024, meaning more than two in three working age Tanzanians were working. The report places the ratio above all but five countries with populations larger than 1.5 million for which comparable data are available. Unemployment is also estimated to have fallen from 8.7% in 2020 to 6.1% in 2025. Those statistics look strong until the nature of the employment is examined. Agriculture still employs 54% of workers. Seventy five percent of workers are own account workers, another 17% are contributing family workers and employees represent only 8% of the workforce. Informality increased from about 93% in 2020 to around 95% in 2024 as the working age population expanded faster than formal employment. The median worker earns TZS 1,005 an hour, including profits and income received in kind. Tanzania therefore has a very high rate of participation in work alongside an exceptionally thin layer of employment that combines adequate earnings, stability, contracts and social protection. The report attempts to quantify how thin that layer is. Using four criteria of job quality, decent pay, a written contract, social security and reasonable job security, the World Bank estimates that only about 550,000 of Tanzania’s roughly 26 million jobs qualify as unambiguously high quality. Only about 120,000 of those jobs are in the private sector. Almost all of the highest quality private jobs are formal, urban and concentrated in enterprises with at least five workers. The distribution also exposes a spatial problem: nearly half are in Dar es Salaam. This changes how Tanzania’s employment challenge should be framed. A policy agenda built around “creating jobs” can count millions of people as economically successful even when they remain in activities generating little surplus income. The relevant economic objective is movement up the productivity ladder: from subsistence agriculture towards commercial agriculture, from survival self employment towards scalable enterprises, from informal labour towards better paid formal work and from firms that merely survive towards firms capable of investing, innovating and hiring. Why Has 6% Growth Not Produced Much Faster Poverty Reduction? The weak connection between GDP growth and household welfare is one of the most consequential findings in the report. Tanzania has averaged approximately 5.7% economic growth over two decades, yet the World Bank argues that much of that expansion has come from accumulation of labour, capital and other resources rather than large productivity gains. The share of Tanzanians below the Bank’s $4.20 daily poverty line has consequently changed very little in recent years, while real private consumption per person barely increased between 2018 and 2025. This is what low productivity employment looks like at national scale. An additional worker can increase total GDP without generating much additional income per worker. Another small informal shop can increase economic activity without creating a large increase in productivity. Another hectare under cultivation can raise agricultural output while yields per hectare and income per farmer remain low. Aggregate growth can therefore continue while household living standards improve slowly. Tanzania’s growth composition in 2025 deserves attention in this context. Government spending accounted for more than two thirds of real GDP growth, compared with an average of 45% between 2021 and 2024, while private investment and consumption expanded more slowly. Public expenditure rose ahead of the October 2025 elections, with recurrent spending gaining importance. Services performed strongly, but the wider development question is whether future growth becomes progressively more dependent on private investment and productivity rather than additional public expenditure and factor accumulation. The World Bank’s projection of 6.5% medium term growth explicitly assumes stronger private sector activity and continued business reforms. For Tanzania to become significantly richer, the composition of the next percentage point of GDP growth may matter more than the headline number itself. Why Are So Few New Firms Being Created in Tanzania? One of the report’s most striking comparisons is the age of Tanzania’s formal businesses. Only 12% of formal firms in Tanzania were classified as young firms in 2023, meaning they had started operating after 2018. Rwanda’s equivalent share was 38% and Ghana’s was 26%. The comparison points towards a private sector that is generating relatively few new formal entrants. The problem extends beyond the number of businesses created. Among Tanzanian formal firms younger than five years, only 20% had productivity above the median, roughly half the proportion found among comparator economies. Thirty two percent of firms reported that they had initially begun operating without registration, up from 25% in 2013. Tanzania performs better on the legal architecture of business entry than those outcomes might suggest. The World Bank notes that Tanzania scored 72 out of 100 on business entry in the 2025 Business Ready assessment, placing it in the top 20% globally. BRELA reforms and improvements in TRA registration have strengthened the formal framework. The problem is increasingly the difference between the rules on paper and the experience of businesses moving through them. Registration remains costly and time consuming in practice, particularly for foreign businesses, while licensing requirements across central government, regional and local authorities are not fully harmonised. Senior managers in Tanzanian firms reported spending almost 14% of their time dealing with regulatory requirements in 2023, compared with 2% a decade earlier and a regional average of 8%. The 12% young firm statistic therefore says more than Tanzania needs additional entrepreneurs. An economy needs regular entry of new firms because new businesses introduce competition, test new technologies, replace unsuccessful companies and create new employment. When entry is weak and exit is difficult, resources can remain trapped in businesses that produce relatively little while potentially more productive firms struggle to emerge. Tanzania’s insolvency framework illustrates the other side of the problem. The World Bank’s Business Ready assessment gave the country only 30 out of 100 for insolvency, placing it in the bottom 20% globally. Business dynamism requires both entry and exit. Entrepreneurs are more likely to take risks when viable firms can be reorganised during distress and failed firms can close without years of legal paralysis. A system that makes failure excessively costly can discourage the experimentation required to create successful firms. Why Are Tanzanian Firms Investing So Little? The decline in firm level investment is arguably more concerning than the number of young firms. The share of surveyed firms purchasing fixed assets fell from 40% in 2013 to 22% in 2023. Average investment dropped from about $116,000 to $24,000 in constant 2009 dollars, and the World Bank estimates that the average Tanzanian firm now invests only 11% of what it did a decade earlier. This is happening even as national accounts show rising economy wide investment, a divergence the report attributes partly to construction and large public infrastructure projects. Tanzania may therefore be investing substantially as an economy while the ordinary private firm is investing considerably less. Roads, railways, electricity networks and major public projects can raise productive capacity, but structural transformation also depends on thousands of companies purchasing machinery, opening facilities, adopting software, developing new products and expanding production. The technology numbers reinforce the concern. Only about 4% of Tanzanian manufacturing firms license foreign technology compared with 11% across Sub Saharan African comparators. About 7% of firms spend on research and development against 13% among peers. Only 34% have a website compared with 42% regionally, while 14% introduced a new product or service compared with roughly 25% among comparator firms. A firm that does not invest will eventually find it difficult to raise productivity. A firm that does not raise productivity has limited room to raise wages while remaining competitive. Tanzania’s job quality problem therefore cannot be separated from the investment behaviour of its businesses. Is Tanzania’s Credit Boom Financing Productive Investment? This is one of the most interesting contradictions in the report. Private sector credit grew by 28.1% year on year in June 2026, the fastest pace in several years, while banking sector asset quality remained strong and non performing loans stood well below the prudential ceiling. Yet one in three surveyed firms reports being fully or partially credit constrained, compared with a Sub Saharan African average of 22%. Only 14% of Tanzanian firms finance investment through banks, compared with 25% in Rwanda and 38% in Côte d’Ivoire. Even among Tanzanian firms that use bank financing for investment, bank credit covers only about 4% of investment expenditure, compared with 16% in Rwanda and 13% in Côte d’Ivoire. The numbers suggest that rapid credit growth and adequate long term investment finance are not the same thing. Banks can expand lending rapidly while remaining concentrated in personal loans, trade finance and short term working capital. Machinery, factories, technology and business expansion often require longer maturity financing that matches the life of the investment. Tanzania’s corporate bond market remains small, the stock exchange lists relatively few firms and development finance institutions do not yet fill the entire long term financing gap. The question for Tanzania is therefore becoming less about whether credit is growing and more about what the credit is financing. Twenty eight percent credit growth produces a different economy if it finances productive assets than if much of it circulates through consumption and short maturity commercial activity. How Productive Are Tanzania’s Formal Firms? The World Bank estimates that labour productivity among Tanzanian firms with at least five employees is about 49% lower in services and 70% lower in manufacturing than the average among Sub Saharan African economies included in its Enterprise Survey comparison. The gap within Tanzania is even more revealing. Firms in the most productive 10% are approximately 32 times as productive as those in the bottom 10%, compared with a ratio of about 17 times among the report’s aspirational peer economies. In retail, the most productive firms generate 42 times more sales per worker than the least productive. Among food processors, the gap is 18 times. Such dispersion means Tanzania does not simply have a national productivity problem. It has a resource allocation problem. Highly productive firms operate in the same sectors as firms producing dramatically less per worker. Capital, workers, land and market share are not moving quickly enough towards businesses capable of using them more productively. The report’s frontier firms illustrate the dilemma. The most productive 10% of businesses accounted for roughly three quarters of sales in 2023 and were at least 2.7 times as productive as other firms. They paid wages around four times higher, yet accounted for only about 18% of formal firm employment. Tanzania therefore cannot depend exclusively on a small group of highly productive firms to absorb the millions of workers entering the labour force. It needs a much larger middle of firms that are productive enough to pay better wages but labour intensive enough to hire at scale. That may be the most important private sector challenge identified by the report. Can Tanzania Produce Enough Better Jobs for Its Growing Workforce? Approximately two million Tanzanians reach working age every year, while about 400,000 leave the working age population. Formal employment is not expanding anywhere near that speed. The arithmetic means Tanzania will continue producing large numbers of informal and self employed workers unless the private sector changes structurally. The solution cannot be simply moving everyone into salaried corporate jobs. Agriculture, small enterprises and self employment will remain important for many years. Productivity must rise within those activities at the same time that more people move into larger formal businesses, manufacturing and higher value services. For a farmer, a better job may mean higher yields, irrigation, commercial production and access to processing markets rather than leaving agriculture altogether. For a micro entrepreneur, it may mean growing from one worker to five, gaining access to finance and entering a formal supply chain. Human capital limits how quickly that transition can happen. The report estimates learning adjusted schooling for Tanzanian adults at only 4.5 years. Only around 40% of secondary school age children are enrolled, while many workers enter the labour market without the foundational skills needed for more productive employment. The World Bank also finds that workers with lower secondary education earn between 22% and 30% more in formal private sector employment than those with only primary schooling. Technical training produces much larger earnings gains when workers already possess those foundations. Tanzania therefore faces a two sided constraint. Firms say they struggle to find the productive conditions needed to invest and grow, while many workers lack the skills needed by more productive firms. Solving only one side produces weak results. Training thousands of workers for jobs that businesses are not creating leaves skilled workers unemployed or underemployed. Encouraging investment without producing workers capable of operating more advanced businesses limits the returns to that investment. Why Agriculture Still Sits at the Centre of the Jobs Problem Agriculture employs 54% of Tanzania’s workforce, making productivity in the sector inseparable from the national jobs question. The sector grew by 4.1% in 2025, but the report identifies input market inefficiencies, fertilizer pricing and uneven access to modern production methods as constraints on faster productivity growth. Tanzania also imports about 40% of its fertilizer from Gulf countries, exposing farmers to energy, shipping and geopolitical shocks. The fertilizer subsidy system presents another distribution problem. According to the World Bank, the richest 20% of farmers are three times more likely than the poorest 20% to use inorganic fertilizer in the first place, meaning subsidies can disproportionately benefit farmers who are already more commercially established. Importers have also reported subsidy arrears, while controlled retail prices do not always adjust quickly enough when global fertilizer costs rise. A country where more than half of workers remain in agriculture cannot significantly improve national labour productivity while agricultural productivity remains low. Industrialisation and services matter, but Tanzania’s productivity transition will also happen inside farms, through irrigation, mechanisation, better seeds, fertilizer access, storage, logistics and processing. Why Tanzania’s External Position Makes Productivity More Urgent The current account deficit widened to 2.5% of GDP in FY2026 as higher energy prices, freight and insurance costs increased the import bill. Elevated gold prices provided some protection, but they were not enough to prevent deterioration in the external balance. This strengthens the case for productive job creation because Tanzania needs businesses that do more than employ people. It needs firms capable of earning or saving foreign exchange. Agriculture can do that through higher food exports and reduced dependence on imported inputs. Mining can do it through expanded mineral output and processing. Manufacturing can do it by replacing selected imports and entering regional markets. Tourism and modern services can generate foreign exchange without requiring heavy physical exports. Tanzania’s current macroeconomic position remains comparatively comfortable. Inflation has stayed within the 3% to 5% target range, public debt is around 49% of GDP and government revenue exceeded budget targets during FY2026. None of those strengths removes the need for structural change. They provide a relatively stable platform from which Tanzania can attempt it. What Would It Take to Create More Good Jobs in Tanzania? The World Bank divides its response into two connected areas. Tanzania needs a larger base of productive firms and a workforce capable of moving into the opportunities those firms create. On the business side, the report recommends simpler and better coordinated registration, stronger insolvency procedures, improved land administration and greater access to long term finance. On the worker side, it calls for stronger foundational education, social protection that supports movement into better work, better labour market information, recognition of skills acquired informally and programme designs that account for the particular constraints faced by women. The report ultimately changes how Tanzania’s economic success should be measured. Six percent growth remains important. Low inflation matters. Sustainable public debt matters. Revenue mobilisation matters. Roads, railways, electricity and public infrastructure matter. But the deeper measure of structural transformation is whether a Tanzanian worker produces and earns substantially more ten years from now than today. A country where 68.7% of working age people are employed but only a very small share hold high quality jobs does not primarily need to discover how to make people work. Tanzanians are already working. It needs to build an economy in which their work produces more value. A country does not become richer because more people are working. It becomes richer when the work they do becomes more productive. FAQ Is Tanzania creating enough jobs? Tanzania has a high employment to population ratio of 68.7%, but the World Bank’s Making Jobs Work report concludes that the main problem is job quality rather than the absolute number of people working. How much is Tanzania’s economy expected to grow in 2026? The World Bank projects real GDP growth of 6.1% in 2026 and an average of about 6.5% over the medium term. Why are jobs in Tanzania considered low productivity? Most workers are concentrated in agriculture, informal self employment and other activities with low earnings. Agriculture employs 54% of workers, while median hourly earnings are only TZS 1,005 according to the report. How many young firms does Tanzania have? Only 12% of formal Tanzanian firms are classified as young firms, compared with 38% in Rwanda. The World Bank links weak firm entry and investment to Tanzania’s difficulty creating better jobs at scale. What is preventing Tanzanian firms from growing? The report identifies business entry and licensing costs, weak insolvency arrangements, limited long term finance, low investment, weak technology adoption and land access problems among the main constraints. What is Tanzania’s public debt level? Public debt stood at about 49% of GDP at the end of June 2026, with the World Bank assessing the country as facing a moderate risk of debt distress.