I'm no expert in policy-making for industry growth, but here are a few relevant observations on the Tanzanian industrial sector and government policy, that might be of interest to the discussion:
I know of more than one entrepreneur in Tanzania that truly seem to believe the Tanzanian manufacturing industry is no more than 3-5 years away from being able to compete price-wise with China. Looking at recent movements in the manufacturing sector certainly suggests this is fairly plausible. The Tanzanian government provide incentives for companies that export their product in the form of tax exemptions - indeed if you export more than 50% of your product then you get 0% corporate tax for your entire company. These incentives have kicked off a few motorcycle assembly plants, where parts are shipped in from China, assembled in Tanzania, and the assembled product is then exported all over the world. A sign of future promise for the Tanzanian economy? Or an unsustainable bubble based only on potentially short-lived tax breaks?
As for the Tanzanian local market, when you import anything here you have to pay about 50% of its value to the government (30% import duty + 20% VAT). Locally produced items naturally don't pay import duty, and any product that is sold to the end-user through a small business or street vendor doesn't pay VAT either - people aren't very good at demanding receipts! Add to this the rising cost of shipping fuel (I'm assuming shipping fuel follows the same trends as oil) and it seems like investment in local manufacturing firms will start to look attractive again.
Unfortunately (for the economy) the exception to this are items such as solar lamps and LPG stoves. This is an interesting example where the government has clearly weighed up the pros and cons, and decided that these items are needed urgently enough to forfeit any long-term benefit that a local manufacturer could bring to the economy. In my opinion I reckon they've got these two particular examples right, but that's just my 2p!
edward.matos at shambatechnologies.com