Capacity Utilization of Enterprises in Tanzania

Structural reforms and market liberalization have led to a transformation of the Tanzanian economy since the mid-1980s. Studies on enterprises in the manufacturing sector seem to indicate that entrepreneurs persistently operated with low capacity utilization in the 1990s. In a liberalized market this appears irrational because, as a consequence, profits are not maximised. The paper discusses how far theoretical approaches in economics can be applied to explain low capacity utilization in the Tanzanian context in the 1990s. It is stated that the absence of markets and low wages can best describe the empirical findings.