Investment Guide: Tanzania
Summary
Tanzania is a country with a wealth of untapped investment potential. A stable political climate, a young and rapidly growing population, and abundant natural resources position Tanzania for sustained economic growth. Additionally, its strategic location in East Africa makes it an ideal hub for trade and commerce. As a gateway to the wider region, it creates access to significant markets and opens up even more potential opportunities for investors.
Recognising that bolstering investment in Tanzania is an invaluable opportunity for both investors and for the social and economic development of the country, the Sixth-Phase Government has prioritised efforts to reinvigorate foreign and domestic investment by actively taking steps to improve the general investment climate.
According to the most recent reports from the Tanzania Investment Centre, the registration of investments were USD 1.2 billion in the first quarter of 2023, representing a staggering increase of 48.9 percent compared to the same period in 2022 (USD 787.4 million) and 160 percent compared to the same period in 2021 (USD 450.6 million). According to the International Monetary Fund, Tanzania’s economy, which now stands at USD 85.4 billion, is set to grow into a USD 136 billion economy by 2028.
Here are the key sectors that present investment opportunuties and contribute to the growth of Tanzania’s economy.
Agriculture
In 2018 the government launched the Agriculture Sector Development Program (ASDP II), which maps the path for agriculture through 2028. The program aims at transforming the agricultural sector, including crops, livestock and fisheries, towards higher productivity, commercialisation level and smallholder farmer income for improved livelihood, food and nutrition security and contribution to the GDP.
The Government plans to transform the sector by promoting commercialisation, prioritising high-potential commodity value chains, and mobilising capital by expanding the role of the formal private sector in agriculture. In 2021, Agriculture contributed to 26 percent of GDP. Agriculture is extremely important for Tanzania’s economic growth prospects.
Tanzania has 44 million hectares of arable land with an estimated 29.4 million hectares suitable for irrigation. A few areas of investment in this sector include agro-industries, agro- processing and large scale commercial farming of sugarcane, rice, wheat and other crops.
Agriculture
The sector directly supports the livelihood of about 55 percent of Tanzanians and 15 percent indirectly. With a population increase of about 3 percent annually, demand in Tanzania is expected to continue to shift dramatically from rural diets of barely transformed staples to urban diets of highly processed and pricier horticultural and animal sourced food products.
Adding value in natural resource– based industries by enhanced processing, especially mass production of processed food products for consumers, is recommended as a starting point for Tanzania to stimulate growth in food manufacturing. In recent years, the agriculture sector has underperformed overall and little private investment has been directed toward agribusiness.
Financial Services
The Tanzanian financial services sector has been experiencing robust growth over the last few years. In 2021, the operating income for the sector increased by 58.8 percent to USD 470 million, the strongest in the decade. There are four categories of banks, oriented towards different markets and clientele operating in Tanzania: local private banks, regional banks, international banks and multinational banks. The banking system in Tanzania dominates the financial system and is liquid and resilient to most of the shocks.
Opportunities for investment in this sector include investing in digital financial infrastructure which is key in ensuring more financial inclusion in Tanzania. Other opportunities include; the establishment of community & microfinace banks, insurance companies, fintech companies and financial leasing companies.
Manufacturing
The manufacturing sector in Tanzania is still relatively small but has a significant contribution to the country’s overall GDP. Over the past decade the sector has averaged 8 percent of GDP and 4 percent annual growth rate. Since agriculture is the mainstay of the Tanzanian economy, the manufacturing industry is centred around the processing of local agricultural goods.
The manufacturing sector in Tanzania consists mainly of food processing, textiles and clothing, chemicals, and others, including beverages, leather and leather products, paper and paper products, publishing and printing, and plastics.
Currently, the domestic value addition is limited by the dependence of imported intermediate goods, signifying limited inter-industry linkages that are important for promoting the domestic manufacturing base and employment. To bolster the growth of the manufacturing sector, the government is taking steps to resolve technological, financial, policy and administrative constraints. An example of this is the formation of Special Economic Zones offer tax benefits to manufacturing companies.
Mining and Energy
Tanzania is abundant in minerals and natural resources, such as gold, diamonds, coal and natural gas. As of 2021, nearly 500 active licenses explored over 40 types of minerals in the country. Unsurprisingly, mining activities constitute a prominent industry in Tanzania’s economy.
Mining and quarrying accounted for roughly 9.8 percent of the Tanzanian solar and wind power and uranium, much GDP in 2022. The Government plans to of which is untapped. have this sector contribute 10 percent of GDP by 2025.
The Tanzania mining industry remains attractive to investors, given the next few years of significant diversification to mining nickel, uranium and coal. There is also availability of investment incentives and supply chain opportunities in the mining sector.
Tanzania is also endowed with diverse energy sources, including biomass, natural gas, hydro, coal, geothermal, Opportunities in the energy sector include: generation, transportation and distribution of energy from various sources and power infrastructure development, rehabilitation and expansion.
