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                                      HOUSEHOLD CONSUMPTION
                                                       AND EXPENDITURE

6.1 Introduction
         The Household Budget Surveys collected extensive information on household
         consumption and expenditure. This includes information on which items were
         consumed, on their source and their cost.This chapter examines the overall level
         of household consumption and how it has changed over the 1990s. It also
         examines the structure of household consumption, presenting the share of
         consumption that is taken by the various categories of goods and services.

6.2 Measuring Consumption and Expenditure
         The 2000/01 HBS collected information on household consumption and
         expenditure in three ways. A diary was kept in each household to record items
         purchased and consumed each day for one calendar month.This was filled in by
         a household member or, where household members were illiterate, by the
         interviewer. The interviewer was expected to visit households every two to
         three days to ensure that the diary was being correctly completed; visits were
         expected every day in the case of illiterate households. In addition to this diary,
         individual adults were provided with a personal diary that they used to record
         their personal expenditure outside the household. This information was later
         added to the household diary. In a separate part of the questionnaire,
         respondents were also asked to recall expenditure on non-food items in the last
         year.The same procedures were used in the 1991/92 HBS except that personal
         diaries were not provided.

         The consumption recorded in the diary included both items that were purchased
         and items that were consumed but which had not been purchased: home
         produced items, transfers received by the household (such as gifts or support
         from other households) and payments in kind for work done. Both the quantity
         consumed and its value were recorded. Items that had not been purchased were
         valued at local market prices.

         Since all items that were consumed were priced, a single monetary measure of
         household consumption can be calculated, denoted household consumption
         expenditure. This includes food consumption, health and educational expenses,
         expenditure on consumer durables and expenditure on other non-durables. It is
         standardised to 28 days.
68          HOUSEHOLDBUDGETSURVEY Final Report

              The surveys also collected information on household incomes. However,
              household income in developing countries fluctuates more than expenditure
              over the short term and is often reported less accurately. Consumption
              expenditure provides a more reliable measure of household income, reducing
              reporting errors and smoothing out short-term fluctuations. For this reason,
              consumption expenditure is used as the basis for a monetary measure of welfare.

              The collection of consumption data in a monthly diary generates a large volume
              of data, unavoidably producing some errors, which necessitated a careful data
              cleaning procedure. This cleaning was carried out for both the 1991/92 and
              2000/01 data to ensure comparability. For some items, it was possible to derive
              information on consumption either from the diary or from the twelve-month
              recall section, the choice being based on an analysis of relative frequencies and
              values in the two sources. These and other technical issues are discussed in
              Appendix A2.

              Chapter 7 compares household consumption levels to a poverty line. There, a
              more restricted consumption measure is used to provide a more precise
              measure of welfare. However this chapter focuses on describing consumption
              patterns more broadly.

6.3 Average Consumption Expenditure Levels
              Table 6.1 shows the average levels of consumption expenditure for 28 days by
              area. Mean expenditure per capita is 10,120 Shillings.The median – which shows
              the value below which half of the population falls – was substantially lower,
              because a small number of high values have more effect on the mean.

              Mean per capita expenditure in Dar es Salaam is 2.6 times higher than in rural
              areas. Differences in average consumption expenditure per household were
              slightly smaller because rural households tend to be larger.

              Comparing the regions, average expenditure is highest in Dar es Salaam, Mbeya
              and Mtwara and lowest in Rukwa, Singida and Kigoma (Map 6.1).

              Measure                        Dar es Salaam Other urban   Rural areas   Mainland
                                                              areas                    Tanzania
              Mean expenditure per capita        21,949       14,377        8,538       10,120
              Median expenditure per capita      16,349       11,561        6,860        7,523
              Mean expenditure per household    117,893       78,079       52,649       59,935

              Note: Consumption expenditure in nominal prices.
69          6. Household Consumption and Expenditure

                An adjustment for price inflation is required to compare expenditure in 2000/01
                with 1991/92.This is calculated using price information contained within the HBS
                data itself, because both the quantity consumed and its value were recorded.
                From this data, a Fisher Ideal price index is calculated. This suggests that an
                average consumption basket has increased in price by a factor of 2.49 since
                1991/92, well below the increase in the consumer price index.The Fisher Index
                has the benefit of taking into account changes in consumption patterns that have
                occurred over the period15.

                Table 6.2 presents mean and median per capita consumption expenditure for
                2000/01, together with their equivalents for 1991/92 inflated by the Fisher Index.
                The inflated figures give the values that would be expected if average
                consumption levels had remained constant over the period and only prices had

                This comparison shows that average real consumption levels have increased over
                the 1990s. Mean consumption levels have increased by around 17 per cent in real
                terms. Median levels have increased by around 10 per cent. The increases have
                been largest in Dar and smallest in rural areas. The increase in real rural
                consumption levels is lower still if prices are adjusted separately. Nevertheless, in
                all areas there has been an increase in household average real consumption over
                the 1990s.

                (28 DAYS, 2000/01 TSHS)
                                                                 Dar es Salaam Other urban Rural areas                     Mainland
                                                                                  areas                                    Tanzania
                Mean expenditure:
                2000/01                                                21,949            14,377             8,538             10,120
                1991/92                                                14,896            12,733             7,661              8,686
                Ratio (00/01) / (91/92)                                  1.47              1.13              1.11               1.17
                Ratio with area-specific price adjustment                1.48              1.18              1.09               1.16
                Median expenditure:
                2000/01                                                16,349            11,561             6,860              7,523
                1991/92                                                12,106             9,622             6,300              6,816
                Ratio (00/01) / (91/92)                                  1.35              1.20              1.09               1.10
                Ratio with area-specific price adjustment                1.36              1.25              1.07               1.10

                Note: 1991/92 values are inflated to 2000/01 prices using the national Fisher Index calculated from the HBS data (2.49).
                The second ratio for each measure gives the increase in real consumption when prices are adjusted separately for each of
                the three areas.

               15 Further details on the calculation of the Fisher Index are given in Appendix A2.
70          HOUSEHOLDBUDGETSURVEY Final Report

6.4         The Structure of Consumption
              In addition to providing information on the overall level of household
              consumption, the HBS can be used to look at the structure of consumption.Table
              6.3 shows the mean expenditure per capita on food, household durables, medical
              and education costs and on other non-durables16. In this table, 1991/92 data are
              left in 1991/92 prices.

              FIGURES, 28 DAYS,TSHS)
              Category                                       1991/92                                        2000/01
                                               Dar es      Other   Rural         Mainland     Dar es      Other   Rural         Mainland
                                               Salaam      Urban                 Tanzania    Salaam       Urban                 Tanzania
              Food - purchased                 3,873       2,862  1,011           1,397      10,301        7,114 3,118           4,085
              Food – not purchased                36         361  1,175           1,011         368          876 2,375           2,051
                         Total food            3,910       3,223  2,186           2,409      10,668        7,989 5,492           6,137
              Durables                           577         541    262             314       2,565        1,501   706             923
              Medical expenditure                 52          65     26              32         569          338   190             232
              Education expenditure               66          47     19              25         974          431   138             227
              Other non-durables               1,377       1,237    583             708       7,172        4,118 2,012           2,602
                               Total           5,982       5,114  3,077           3,489      21,949       14,377 8,538          10,120
              Note: ‘Food - not purchased’ includes food produced for home consumption, received as payment in kind or gifts etc. Figures
              are not adjusted for inflation.

              In both years, mean expenditure in all categories is highest in Dar es Salaam and
              lowest in rural areas, with the exception of home-produced food.

              There has been a fall in the share of household expenditure being spent on food
              (Table 6.4) Within this, the proportion of food that is purchased has increased
              while the proportion that is home produced has declined, suggesting a decline in
              the importance of subsistence farming. Other items have seen substantial
              increases in their share of household expenditure – particularly medical and
              educational costs and other non-durables17.

              The proportion of household expenditure that is devoted to food is usually
              related to a household’s income. Households with higher incomes spend a lower
              proportion on food. Households in Dar es Salaam spend the lowest proportion
              on food (54 per cent), while rural households have the highest food share (67
              per cent).The share of expenditure on food has declined in all areas.The decline
              is largest in Dar es Salaam and smallest in rural areas, consistent with the growth
              in real consumption levels.

              16. Other non-durables include personal effects, personal care, recreation, fuel, transport, utilities and
                  services, clothes, alcohol and other items. More details of expenditure by item are given in Appendix
                  Table B6.2.

              17. The decline in the share of expenditure on food will in part reflect increases in expenditure on some
                  items that households may have been unable to avoid – for example, in education and medical costs.
                  Food share declines even if these elements are removed, though it declines less than in Table 6.4.
71          6. Household Consumption and Expenditure

                Category                      Dar es Salaam          Other urban              Rural areas        Mainland
                                                                          areas                                  Tanzania
                                               91/92 00/01           91/92 00/01             91/92    00/01    91/92 00/01
                Food - purchased                67.1  52.2            56.9    52.8            30.5     35.2     35.8    38.6
                Food – not purchased              0.7   2.1             9.4     7.9           41.8     31.8     35.5    26.8
                Durables                          7.6   7.8             7.4     8.0             7.2      7.1      7.2    7.3
                Medical expenditure               0.9   2.9             1.2     2.4             0.9      2.1      0.9    2.2
                Education expenditure             1.1   4.0             1.1     3.0             0.8      1.6      0.8    2.0
                Other non-durables              22.6  31.1            24.0    25.9            18.9     22.1     19.7    23.1
                                  Total        100.0 100.0           100.0 100.0             100.0    100.0    100.0 100.0
                Of which, total food            67.8  54.2            66.3    60.7            72.3     67.0     71.3    65.4

                Note:These budget shares are means of the shares calculated for each household.

6.5 Conclusions
                Average consumption expenditure per capita is around 2.6 times higher in Dar
                es Salaam than in rural areas. Mean real expenditure levels have increased by
                around 17 per cent between 1991/92 and 2000/01, suggesting that household
                real incomes have been rising. The proportion of expenditure devoted to food
                has also declined, as would be expected if real incomes have risen.There has also
                been a decline in the proportion of food that is home produced, as dependence
                on subsistence has declined. The share of expenditure devoted to health and
                education has increased.

                All areas have seen a real increase in household consumption and a fall in the
                food share. However, there has also been a substantial widening of the gap
                between Dar es Salaam, other urban areas and rural areas. Consumption levels
                have risen most in Dar es Salaam and least in rural areas. The share of
                expenditure on food shows a correspondingly larger fall in Dar es Salaam and a
                smaller fall in rural areas.

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