The tenth edition of the Tanzania Economic Update contains the World Bank’s regular review of Tanzania’s economy and near term outlook, and a special focus chapter on the pressing issue of water resource management.

The report comes at a critical juncture in the country’s development history: the Fifth Phase Government has outlined an ambitious vision for the country, in which it envisages Tanzania becoming a semi-industrialized nation by 2025. Eighteen months on from the plan’s inception, this report provides an update on the state of the economy and aims to make a positive contribution to the challenges encountered.

Part One presents a discussion and analysis of Tanzania’s recent macroeconomic and fiscal performance, with an updated outlook for the near term. Part Two presents an analysis of Tanzania’s management of its water resources, showing that the management of these resources has massive implications for Tanzania’s people, its economy and its environment, and that there is an urgent need for improvements.

Raising the watermark in Tanzania’s growth and poverty reduction picture

Tanzania is relatively blessed with its water resources.

Yet over the past 25 years, the country’s population has doubled to about 53 million and the size of its economy has more than tripled. As a result, Tanzania’s per capita amount of renewable freshwater has declined, from more than 3,000m³ to about 1,600m³ per person today – below the 1,700m³ level that is internationally considered to be the threshold for water stress.

Perhaps the most poignant picture that captures the scale of the stress would be the Great Ruaha river, which flows through the Usangu wetlands and the Ruaha National Park into the Rufiji River. To call it “Great,” as its name suggests, might be something of a misnomer today.

The river is a shadow of its former self, running dry for 2-4 months each year. With its wet season water flow now also under threat, communities and industries downstream – including hydropower generation – are under increasing stress.

The situation is also endangering wildlife in the Ruaha National Park, and the tourist income that comes from it. The primary cause of this change is the expanding amount of informal irrigation upstream. For the individual farmers concerned, irrigation provides much needed economic opportunities, but the cumulative effect on the river system is unsustainable.

Finding trade-offs 

This example illustrates one of the key challenges of water resource management: the need for proactively managing trade-offs in water use across many different stakeholders.

Water is a multifaceted resource, critical not only to human welfare and the environment, but also for a country’s economic fortunes. It is against this backdrop that the latest Tanzania Economic Update, published by the World Bank on 6 November 2017, describes the urgent need for better water resource management to ensure that water does not put a brake on Tanzania’s development.

Around 89 percent of Tanzania’s water is used for agriculture (compared to a global average of 70 percent), about 10 percent for domestic consumption (on a par with global averages), and about one percent by the industrial sector (which is very low by global standards).

Tanzania’s path of economic growth will require a lot more than 1 percent of its water for industry, and so one key challenge will be working out how to reduce the large quantity of water consumed by agriculture, while increasing food production and protecting rural livelihoods.

Droughts cause shocks

Water is also a cause of economic shocks: in the past 15 years, there have been seven significant droughts in Tanzania. The country’s agricultural productivity suffers an estimated annual loss of about $200 million because of weather-related risks, especially drought.

Earlier in 2017, aggregate food prices increased by 12 percent, due to drought-related food shortages. Hydropower production, which accounts for around 42 percent of energy generation in Tanzania, also declines during droughts, creating major additional generation costs.

Tanzania has made progress toward increasing household access to water supplies, with 63 percent of the population now having access to a basic water supply. On the other hand, only 27% of the population has access to basic and improved sanitation.

While the absolute amounts of water required for domestic water and sanitation are not great, ensuring water sources are sustainable, not polluted, and properly managed is critical. Tanzania’s major cities, including Dar es Salaam, Arusha, and Morogoro take their water from stressed rivers with inadequate source protection, while Dodoma – site of the country’s political capital – relies almost entirely on groundwater.

Managing solutions

The challenge is how to manage water better.

One key step is to allocate water to uses that maximize the economic, social, and environmental benefits for the country. Trade-offs in water use, such as between agriculture and hydropower production, are already taking place, but it is not clear that they are happening in ways that maximize benefits for Tanzania. Such trade-offs will require clearer institutional mandates, stronger coordination across sectors, strong enforcement, and better prioritization of water-related investments. In short, it requires political as well as technical leadership.

Another key part of managing water better is to value it appropriately. Tanzania needs to value and price water in ways that reflect its growing scarcity, and to create disincentives to wasting water, as well as recognizing its differing values to households, farmers, cities, and industrialists. Subsidizing small amounts of household water for the poor is reasonable; subsidizing large amounts of water for industry, farmers, and utilities is not.

Bulk raw water prices (that is, the cost prior to water treatment and its delivery to houses) in the Wami-Ruvu basin are so low that running a tap for an entire year would cost around $2.60.

Finally, it’s often said that you can’t manage what you can’t measure. This is particularly true for water, where good information can make trade-offs easier to manage, reduce loss and waste, and help minimize the social and economic impact of droughts and floods. Data on water is relatively scarce in Tanzania, particularly data on groundwater, the quality water, and its use. Investing in better data collection, including in new technologies, as well as in stronger institutions and prioritized infrastructure should be an economic priority for the current government.

Water does not have to become a significant constraint to growth and prosperity. Tanzania still has a reasonable water endowment compared to many other countries in the region and the world. Prudent water resource management policies, strengthened institutions, better data, and a collective commitment to sharing this scarce resource will ensure that Tanzania can reach its development goals with the water it has at hand.