Skilling Tanzania: improving financing, governance and outputs of the skills development sector

In this working paper Dr Antonio Andreoni discusses potential reforms in the vocational skills training sector in Tanzania.

More skills, higher levels of skills, and different kinds of skills have to be developed and effectively organised if countries are to be able to enhance their industrial competitiveness and, as a result, improve their governance systems and the functioning of their institutions. Despite several efforts to invest in the skills development sector in Tanzania over the last decade, the sector has remained weak and presents a number of critical challenges for the country.

First, Tanzania needs to integrate and create employment for large groups of young people every year, many of whom come from the poorest segments of society. Second, the quality and type of skills developed in Tanzania do not meet the requirements of productive organisations, while at the same time there are very few firms capable of organising and deploying skills effectively. The third major challenge that Tanzania faces relates to the financing and governance of the skills development sector.

In many countries in Southern and Eastern Africa, governments have relied on dedicated levies to finance the skills development sector (the Skills Development Levy (SDL) in Tanzania). The governance of these schemes is made particularly difficult by the fact that private organisations hardly see the results of their financial contribution on the ground. In some cases, this is because skills development takes time and is sector-specific, in other cases it is because firms themselves do not develop the organisational capabilities needed for them to be able to benefit from the improved skills. As a result – and despite the fact that both governments and companies have a strong joint interest in developing skills – more often the sector is affected by conflicting dynamics and allegations of resource misallocations and tax avoidance.

In Tanzania, vocational education and training (VET) activities and services are run by around 520 providers and promoted under more than thirty programmes and public–private partnership (PPP) schemes (e.g. Integrated Mining Technical Training (IMTT) in the mining sector). The existing VET centres are extremely heterogenous with respect to their capacity and training quality, but also with respect to the proportion of long and short courses they are able to provide. VET providers include public VET centres, some of which are owned by the VET Authority (VETA). The latter are funded through the SDL, which is set at 4.5% of firms’ monthly payroll.

The SDL in Tanzania is significantly higher than in Kenya and South Africa and there are worries that this can create a competitive disadvantage and discourage formal employment. Moreover, business organisations and associations have lamented the fact that the levy is not used entirely for VET programmes, and that accountability of the financing and allocation model needs improvements.

In order to ensure more constructive engagement between the public and private sector, the transparency and accountability of the fund flows seem to be an important preliminary condition. This implies: (i) a gradual move away from a centralised system where the SDL is used to fund general government expenditures; (ii) a less ambiguous legal framework which allows tracking of SDL collection and allocation; (iii) a more direct link between sectoral-level collection and allocation, while guaranteeing that cross-sectoral needs are met; (iv) increased voice and accountability in the curriculum and determination of whether existing training models are fit for purpose.

Reform opportunities also exist in terms of restructuring incentives to take into account differences across sectors and firm types, as well as different governance levels. Another important area for reform relates to the design and delivery of skills training itself. There is a significant need for greater differentiation between skills training to meet the needs of current employers, and skills training to enable trainees to establish new economic activities (i.e. self-employment). Finally, promoting the involvement of the private sector in on-the-job training through industrial placements, dual apprenticeships and internships is critical to improve the overall supply of quality VET and a skilled workforce. The introduction of rebate or grant models such as those adopted in South Africa and Kenya could potentially improve the link between VETA and VET providers and private companies.

Read the working paper.