Tanzania's industrial sector plays a noteworthy part in the wider economy, though it remains somewhat hampered by a reliance on agricultural raw materials.

Though Tanzanian industry remains limited by a reliance on the nation's agricultural sector and on the import of raw and intermediate materials, it has taken significant steps along the road to diversification in recent years. Despite the challenges it faces, value-added manufacturing contributes approximately 10% to GDP, a figure that has been steadily increasing on the back of an expanding economy and the growth of the mining sector. Industrial production grew by 7.4% in 2013, compared to growth of 8.2% in 2012. The steady growth of the sector can be attributed to increased investment in agri-business and metallurgical manufacturing and an upswing in manufactured exports to $1.07 billion in 2013.

With agricultural output changeable due to climatic and technological challenges, the large volume of Tanzanian industrial produce based on farming suffers from inconsistent output. However, the production of foods and beverages is a key component of the sector, and has achieved some degree of success, even if the majority of its yield is destined for the domestic market. This area comprises around one-half of value-added manufacturing in the country, and includes segments such as fish canning, grain milling, vegetable oils, sugar products, animal feeds, and preservatives. Seafood, including processed fish and crustaceans, represented a significant share of manufacturing exports. In 2012, overseas sales of fish fillets were valued at $154 million, or 2.76% of the total, while other areas achieved lower volumes.

Other agricultural by-products and treated produce made up a reasonable share of exports in the same year, with vegetable residues at $58.9 million, rolled tobacco at $32.9 million, cocoa beans at $27.8 million, and processed nuts and fruits at $1.98 million. Alcohol exports were also relatively low, though the blending and distilling of beer and spirits, as well as wine and cider, continue to play an important role in the manufacturing sector. Tanzania is the fifth-largest beer market on the continent, and as such an attractive country for investment considering its population. Foreign firms producing beverages in Tanzania are increasingly reliant on local farmers for barley and other ingredients, encouraging small-scale industry and farming to become part of larger production processes.

Over 90% of manufacturing firms are private, as a result of a concerted effort on the part of the government to privatize the economy. This has had the consequence of reducing the number of larger public entities in industry. However, the largest 40 companies employ 36% of manufacturing labor, according to a UNIDO report on Tanzanian industry. Government initiatives to strengthen the SME segment are ongoing, as the creation of new employment opportunities for a rapidly expanding labor pool becomes more pressing than ever before.

The spinning, weaving, and knitting of textile products and rugs, carpets, rope, and twine has also emerged as an important area. Bedspreads alone accounted for $55.5 million in exports in 2012, while prepared cotton reached almost $40 million. Twine and rope represented approximately $12 million in exports, and coconut or other vegetable fibers and packing bags made up $10.4 million and around $14 million, respectively. Tanzania is the fourth-largest cotton producer in Africa with over 40 companies involved in the industry. In 2012, $155 million worth of raw cotton was exported, or 2.78% of total exports. Animal skins and leather products, while in some cases processed and treated locally, are for the most part exported in their raw form. This area is considered a crucial potential manufacturing opportunity for the country, if mills, tanneries, and other treatment facilities can be integrated with other value-adding processes.

Rolling mills and foundries also contribute to the industrial base of Tanzania, producing a diverse range of metal instruments such as iron pipes, coated flat-rolled iron, sheets, strips, tubes, plates, and rods. Scrap copper exports were worth $27.8 million in 2012, while refined copper and scrap iron were worth $16.4 million and $14.8 million, respectively. These industries have been the source of the highest number of new jobs in the sector. Aside from metals, Tanzania produces fertilizers, pesticides, detergents, paints, and other industrial chemicals. The development of a nascent medicinal and pharmaceutical industry in recent years has also caught the attention of investors; however, issues related to the protection of intellectual property rights under Tanzanian law and a lack of skilled human resources have retarded its development to some extent.

This diversification of industrial activities has been a key strategy of Tanzanian governments since the early 1990s, when the privatization of state enterprises began in earnest. A direct consequence of this model has been the introduction of technologies and know-how to the national productive matrix, a process outlined in the Sustainable Industrial Policy 2020 (SIDP). Spread across three primary phases, the SIDP is now mid-way through the third period, which is focused primarily on attracting major investments of foreign capital, with the government having already consolidated the basic industrial capacities of the nation. In addition, the elaboration of the Integrated Industrial Development Strategy 2025 (IIDS) in 2010 has served to augment the successes of the SIDP.

Most industrial activity in Tanzania is centered around the commercial capital of Dar es Salaam. Over 50% of major industrial facilities are based in this city, though some have been established in Arusha and smaller cities including Mwanza and Kilimanjaro in the north, and Tanga on the northeastern coast of the country. The establishment of Special Economic Zones to create heavy industrial chemical products and cement, made from locally sourced materials, has shown positive results, and is an area of considerable future potential. A key element of government strategy going forward will be to decentralize the development of the manufacturing sector based around regional industries, and to encourage more export-oriented industries such as those previously mentioned, as well as ICT products and electrical goods. However, challenges related to poor infrastructure, incomplete diversification, and low value-added produce will limit its potential unless adequately resolved within the established timeframe. The stated goal of the authorities is to reach a 15% contribution to GDP by 2020, a target that will be reachable if growth continues.