Why Tanzania’s investment climate attained remarkable growth

TANZANIA: TANZANIA’S investment climate experienced a significant boost in 2023, with the number of registered projects increasing by 15.2 per cent and their total value rising by 55.8 per cent compared to the previous year.

According to the 2023 National Investment Report, presented by Prime Minister Kassim Majaliwa in Dar es Salaam last week, the total value of registered projects surged to 8.658 billion US dollars (about.6tri/-) from 5.658 billion (about 15.2tri/-) in 2022.

Implementation of national development plan

This dramatic rise highlights Tanzania’s growing attractiveness to investors as directed in the Third Five Year National Development Plan (FYDP III).

Under this plan, the government is determined to strengthen investment and trade promotion.

This area includes programmes that strengthens domestic markets and take advantage of regional and international market opportunities in promoting trade.

In addition, targeted markets are those that provides opportunities for locally produced goods, including products from agricultural, livestock, fisheries and forests.

FYDP III also seeks to consolidating business and investment environment reforms.

The promotion of investment and trade recognises the private sector and the overarching business environment as key in building a competitive economy based on the industrialised economy as stipulated in the FYDP III theme.

FYDP III seeks to consolidate business environment reforms under the umbrella of the Blue Print framework.

FYDP III also seeks to address bottlenecks impacting investment and the conduct of business, strategic interventions for competitiveness, industrialisation and human development.

And the recent launch event, which introduced five key reports and an online portal aimed at streamlining business operations and improving investment management, emphasised this positive trend and effective implementation of the FYDP III.

What Prime Minister Kassim Majaliwa said

Prime Minister Majaliwa noted that the new projects are anticipated to generate 195,803 direct jobs, a significant increase from the 76,841 jobs created in 2022.

The event was attended by key stakeholders, including government officials, business leaders and international investors.

The report attributes this growth to the new Tanzania Investment Act of 2022, which has created a more favourable investment environment.

The Act reduced the minimum investment capital requirement for local investors from 100,000 US dollars to 50,000 US dollars and improved online facilitation through the Tanzania Electronic Investment Window (TeIW).

Why investment promotion is crucial

Minister in the President’s Office (Planning and Investment), Professor Kitila Mkumbo highlighted that investment promotion is crucial for economic development.

Under President Dr. Samia Suluhu Hassan’s leadership, substantial policy and legal reforms have been implemented, including the 2022 Investment Act, which provides various incentives to attract investors to Tanzania.

The launch of the impact assessment for the blueprint seeks to address job and investment challenges by evaluating the blueprint’s potential outcomes and effectiveness.

This approach aims to identify areas for improvement, make data-driven decisions and ultimately boost employment opportunities and investment conditions, contributing to overall economic growth.

The 2024 assessment report reveals that Tanzania’s economy continued to perform robustly in 2023, with real Gross Domestic Product (GDP) rising to 148.3tri/-, up from 141.2tri/- in 2022.

Despite global challenges such as the Covid-19 pandemic and the Russia-Ukraine war, Tanzania’s economy grew by 5.1 per cent in 2023, compared to 4.7 per cent in 2022.

Inflation remained moderate at an average of 3.8 per cent in 2023, staying within the annual target of 5.4 per cent.

This positive outlook was supported by a diversified economy marked by strong private consumption, significant public spending, robust investment growth and increased exports.

Tanzania continued to perform well in its investment climate throughout 2023.

International organisations, including the World Bank (WB), International Monetary Fund (IMF), World Intellectual Property Organisation (WIPO), Transparency International, Moody’s Investors Service and Fitch Ratings, ranked Tanzania among the top performers in attracting and facilitating investments, as well as in creditworthiness.

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This positioned Tanzania among the top 10 FDI recipient countries in Africa. This notable increase in both domestic and foreign investments is attributed to the efforts of the sixth-phase government under President Dr Samia.

Her administration has made significant progress in business reforms, including improving the business environment, enhancing country branding, engaging the private sector, establishing a dedicated Planning and Investment office and developing essential economic infrastructure.

In his keynote address, Prime Minister Majaliwa urged investors to “Invest in Africa by investing in Tanzania,” emphasising President Samia’s strategic framework of Reform, Reconciliation, Resilience and Rebuilding (the 4Rs) as central to creating a conducive business environment and attracting investment.

He also highlighted the importance of Special Economic Zones (SEZs) in advancing the industrial economy for exports and enhancing product availability.

The government, through the EPZ authority, has registered 34 SEZ areas, with 23 being government-owned.

There is increasing interest from the private sector in establishing SEZs and industrial zones, particularly in the Coast and Morogoro regions.

Additionally, the government has made notable achievements in improving the business and investment environment, including the elimination of over 374 charges and taxes deemed as impediments and the integration of electronic systems to enhance service accessibility.

To address private sector challenges, the government has bolstered institutional systems for business and investment management by establishing dedicated departments in all 184 local government authorities and industry, trade and investment sections in the secretariats of all 26 regions.

European Union (EU) views

European Union (EU) Ambassador to Tanzania, Ms Christine Grau, praised the Tanzanian government’s launch of the pivotal reports, describing them as essential for shaping the country’s economic future.

She noted that the comprehensive nature of the reports reflects a strategic approach to addressing both immediate challenges and long-term development goals.

Ms Grau, expressed her enthusiastic support for the Tanzanian government’s launch of five pivotal reports, saying that these reports are crucial in shaping Tanzania’s economic future.

“The comprehensive nature of the reports reflects a strategic approach to addressing both short-term challenges and long-term development goals,” she said.

The EU views these reports as a significant step toward enhancing Tanzania’s investment climate and supporting sustainable growth and economic stability in the region.

Ms Grau emphasised that the reports are expected to offer valuable insights into Tanzania’s potential, thereby reducing uncertainties for investors and facilitating informed decision-making.

“By highlighting sectors with high growth potential, the reports are expected to attract foreign direct investment, which is crucial for stimulating economic activity and creating job opportunities.

“This influx of investment not only supports infrastructure development but also generates employment, contributing to poverty reduction and overall economic prosperity,” she said.

Ms Grau further remarked on the anticipated impact of these reports on job creation.

She said by identifying high-growth sectors, the reports are likely to attract foreign direct investment, stimulate economic activity and create job opportunities, contributing to poverty reduction and overall economic prosperity.

This, in turn, is expected to lead to the establishment of new enterprises and the expansion of existing ones, thereby creating a wide range of job opportunities across different industries.

What analysts say

In the same vein, trade expert and economist Dr Donath Olomi said that last year’s handsome performance is the outcome of the improvement of business environment in the country.

“Tanzania has gained investors’ trust and confidence as they feel to be safe investing here,” observed Dr Olomi.

He also credited President Samia and Tanzania Investment Centre (TIC) for being proactive in marketing investment opportunities available in the country.

His sentiments were echoed by Professor Abel Kinyondo, an Economist from the University of Dar es Salaam.

“Registration of more projects is a sign of an improvement in business environment given the fact that investors go where there is friendly business and investment climate,” said Prof Kinyondo.

However, he was of the view that for the investment in reference to be meaningful, it should touch the lives of Tanzanians.

According to the just launched report, Prof Kinyondo’s view has been accommodated since the registered projects in 2023 were expected to generate 195,803 direct jobs.

This is equivalent to an increase of 154.82 per cent from the 76,841 jobs expected in 2022.

This could significantly be triggered by the fact that the ownership of projects registered in 2023 increased for both foreign, joint venture (JV) and local.

Local ownership of the projects increased to 159 from the 99 projects marked in the corresponding year.

“Domestic investors have an investment interest of 55 per cent in the total registered projects in 2023,” reads a part of the report.