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Tanzania
POLITICAL AND ECONOMIC DATA
The opening of a market economy in the 1990s
A historically socialist country, Tanzania experienced a transformation of its economy in the 1990s. In 1996, the National Investment Promotion Policy authorized the opening of all sectors to the private sector.
Since 1997, rules have been introduced to govern the establishment of businesses, investments and guarantees, the circulation of capital and the settlement of disputes. Many national companies have been privatized, encouraging private investment. According to the European Commission, the Privatization Master Plan enabled the creation of 336 companies.
President Samia Suluhu Hassan succeeded President Magufuli, who died in March 2021 at the start of his second presidential term, by easing political governance to restore confidence and improve the business climate.
An economy with strong potential, but whose business environment is deteriorating
Annual growth of 6.4% on average between 2000 and 2018 allowed GDP per capita to multiply by 2.5. The Tanzania Development Vision 2025 strategic plan planned to achieve LMIC status in 2025. This was achieved in 2020 with a GNI per capita reaching USD 1,090. Despite weak external demand and tourism, growth would have only slowed to 4.8% in 2020 and 4.9% in 2021, after 7.0% in 2019. The impact of the pandemic on The Tanzanian economy was only felt through the reduction in external demand and tourism, with domestic demand not having been affected, in the absence of health measures in 2020. The IMF expects growth to resume to 4.8% in 2022 and converges towards 5.5% in the medium term, supported by the major infrastructure projects underway.
Stable political situation
Tanzania benefits from a stable political situation. President Magufuli, who died in 2021, showed his determination to eradicate corruption and initiated a “major clean-up” within the administration and public companies. However, this led to an authoritarian turn in the name of the fight against corruption and the national interest. The signals sent by the new president since her accession to power have been very positive, particularly to international investors.
Perspectives and challenges
Market growth and sustained urbanization
Development of special economic zones with several tax advantages for companies setting up there
Increase in tax pressure to reduce the country's dependence on external aid
EU-EAC Economic Partnership Agreement currently blocked
AGREEMENTS
Tanzania has been a member of the East African Community (EAC) since 1967 alongside 5 other countries: Burundi, Uganda, Rwanda, Kenya, and South Sudan. In 2004, the EAC adopted the creation of a customs union, and since 2010, the EAC has established a common market (goods, capital and labor).
Tanzania withdrew from COMESA, a free trade zone of 22 countries in eastern and southern Africa, in 2000, expressing concerns about the negative consequences of tariff arrangements on its economy.
An Economic Partnership Agreement (EPA) has been concluded between the EU and the EAC. On the EAC side, Kenya and Rwanda signed the agreement in September 2016, but Tanzania and Burundi are blocking the finalization to date.
PROMISING SECTORS
Agriculture and agri-food industries
SAGCOT initiative: establishment of an agricultural corridor to boost agricultural productivity, improve food security, reduce poverty and ensure environmental sustainability through the commercialization of smallholder agriculture.
Retail growth driven by urbanization and population growth.
Technologies and services
The Information and Communications sector is the fastest growing sector in the country, growing at 20% per year. Mobile phone subscriptions increased by 89% between 2010 and 2015.
For the government, telephony and connectivity are a priority. Many changes are expected to occur in this market.
Industries and cleantech
In the energy sector, resources in natural gas, hydroelectricity, coal, and renewable energies make Tanzania a very attractive country where investment opportunities are numerous.
Art of living and health
The tourism sector has experienced strong growth for more than 10 years and the development prospects are very promising: the Tanzania Tourism Office aims to multiply its revenues by 8 by 2025, to produce 16 billion USD of profits per year. More than 200 European companies are present in this sector.
BUSINESS ENVIRONMENT
Tanzania is in 141st position in the 2020 Doing Business ranking (out of a total of 190).
The financial services sector is well developed and diversified, with a number of large national and multinational lenders present, and a rate of financial inclusion that exceeds that of most other major African economies. The sector is regulated by the Bank of Tanzania, which is responsible for formulating and implementing monetary policy. The Tanzanian shilling is used as the main unit of account and medium of exchange in most domestic transactions carried out in the country. However, the reference currency remains the US dollar, and the euro is increasingly accepted on the market.
FOREIGN DIRECT INVESTMENTS (FDI)
Tanzania is one of the preferred destinations for foreign investment in Africa (it is among the 10 largest recipients of FDI in Africa). According to UNCTAD's World Investment Report 2021, FDI inflows to Tanzania reached USD 1 billion in 2020, an increase of 2.2% from the previous year.
The current stock of FDI was estimated at USD 16.6 billion in 2020. The mining sector, the oil and gas industry, as well as the primary agricultural products sector (coffee, cashew nuts and tobacco) attract the most IDE. The main investors in the country are China, India, Kenya, United Kingdom, Mauritius, Oman, United Arab Emirates, Canada, United States, Netherlands, South Africa and Germany.
The EACOP oil pipeline project which will transport Ugandan oil to the Tanzanian port of Tanga (1,200 km on Tanzanian soil, total investment of EUR 3.5 billion, Total share around 60%) opens up prospects for many companies.