Tanzania flag Tanzania: Investing in Tanzania

Foreign direct investment (FDI) in Tanzania

FDI in Figures

Tanzania is one of the most preferred destinations for foreign investment in Africa (it counts among the 10 biggest recipients of FDI in Africa). According to UNCTAD’s 2022 World Investment Report, FDI inflows to Tanzania reached USD 922 million in 2021 and showed an increase from the previous year (USD 685 million). In the same period, the total stock of FDI stood at USD 17.1 billion, around 24.4% of the country’s GDP. The manufacturing, mining, and energy sectors are the primary recipients of FDI in Tanzania. Other sectors such as agriculture, tourism, and infrastructure have also been attracting FDI in recent years. The country’s primary investors are China, India, Kenya, the United Kingdom, Mauritius, Oman, the United Arab Emirates, Canada, the United States, the Netherlands, South Africa, and Germany (data Invest Tanzania).

Investors are drawn to the country's commitment to implementing sound macroeconomic policies, its efficient privatization program and abundant natural resources. However, low levels of industrial development, environmental concerns, lack of transparency and poor compliance with legislation are barriers to investment. The business environment remains hampered by ineffective regulations. Labour regulations are not flexible enough to support a dynamic labour market. Foreign investment in land is limited and investment in other sectors can be screened. During John Magufuli's presidency (2015-2021), investor unfriendly policies have caused a growing mistrust of international investors, damaging the perception of Tanzania's business climate, which remains restrictive. In 2017, Tanzania approved new regulations in the mining sector that allows the government to tear up and renegotiate mining contracts, partially nationalise mining companies, introduce higher royalties, enforce local beneficiation of minerals and bring in strict local-content requirements, which undermined investor confidence. President Samia Suluhu Hassan affirmed her commitment to prioritising economic growth and strengthening Tanzania's economy through further development of the country's mining and quarrying sector. She also stressed the need for Tanzania to increase foreign investment to encourage growth, particularly in helium, gold and nickel mining and oil extraction. China and Tanzania have embarked on 19 multi-billion dollar projects. Among these projects, are the USD 11 billion port of Bagamoyo, and the 34 km road between Bagamoyo and Mlandizi, connecting the port to Tanzania's internal rail network and the Zambia Railway. Several foreign companies, including Statoil, BG Group, and ExxonMobil, are investing in natural gas exploration and production projects, while mining companies such as Barrick Gold, AngloGold Ashanti, and Acacia Mining are also investing in the country. Overall, Tanzania has a positive business climate for regional standards and ranks 94th out of 180 economies on the 2022 Corruption Perception Index and 83rd out of 176 on the 2023 Index of Economic Freedom.

 
Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 9441,0331,111
FDI Stock (million USD) 16,49017,52318,634
Number of Greenfield Investments* 121524
Value of Greenfield Investments (million USD) 2341,0091,353

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Tanzania Sub-Saharan Africa United States Germany
Index of Transaction Transparency* 2.0 5.5 7.0 5.0
Index of Manager’s Responsibility** 6.0 3.5 9.0 5.0
Index of Shareholders’ Power*** 8.0 5.5 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Tanzania

Strong Points

Strong points of investing in Tanzania include:

  • High economic growth potential (the GDP growth over the last 10 years is around 7%, one of the fastest growing economies in Africa)
  • Increasing economic stability (inflation down from 16% in 2012 to 4% in 2018)
  • Rich natural resources (arable land and mineral subsoil)
  • Strategic location (the country is a gateway to 6 landlocked countries - Uganda, DRC, Rwanda, Burundi, Zambia and Malawi)
  • Three deep water ports that serve neighbouring countries
  • Access to Southern African Development Community free trade market
  • Political stability (the country has not experienced any conflict or civil war since gaining independence)
Weak Points

Weak points of investing in Tanzania include:

  • Limits of foreign right to private establishment (foreign companies are banned from operating certain tourist businesses and need to give a certain share of ownership to the government to receive a mining development license, investment restrictions on government bonds, etc.)
  • Foreign equity ownership restrictions on certain services sector (telecommunications, TV channels, newspapers)
  • Lack of adequate and reliable power
  • Poor infrastructure
  • Lack of skilled labour force
Government Measures to Motivate or Restrict FDI

Foreign investors can benefit from many fiscal and non-fiscal incentives. These include:

  • Access to Tanzania Investment Centre (TIC) One Stop Facilitation Centre for procedures related to permits, licenses and approvals
  • 0% import duty on Project Capital Goods, Computers and Computer Accessories, Raw Materials and Replacement Parts for Agriculture, Animal Husbandry and Fishing, Human and Livestock Pharmaceuticals and Medicaments, Motor Vehicle in Completely Knocked down (CKD) form and inputs for Manufacturing Pharmaceutical Products, Hotel equipment
  • 10% import duty on semi-processed/semi-finished goods
  • 100% capital expenditure deduction (mining and agricultural sectors)
  • 50% capital allowances in the first year of use for plant and machinery used in manufacturing processes and fixed in a factory, fish farming; or providing services to tourists and in a hotel
  • Right to repatriate 100% of foreign exchange earned, profits and capital.
  • Automatic permit of employment to 5 foreign nationals on projects holding certificates of incentives

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Latest Update: December 2023

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