Tanzania’s Investment Framework Has Dramatically Improved, Investors and Advisors Say

The East African Venture Capital Association (EAVCA) held its 3rd Private Capital in Tanzania conference on 3rd November 2022 in Dar es Salaam.

The conference came at a time of investors’ renewed interest in Tanzania and was focused on showcasing the market’s investment opportunities and framework.

The theme for this year’s conference was “Tanzania’s new era for investment” and topics covered included: country diagnostic on the policy and macro landscape of Tanzania, investment opportunities for private equity and venture capital, and innovation and tech.

Among the speakers was Rose Mumanya, Associate Analyst at Control Risks East Africa, who provided an overview of the political, operational, and security risks in Tanzania.

“In the past few months, we have seen the President of Tanzania reaching out to the opposition, trying to improve relations with them. We’ve seen her give more and more symbolic concessions, and engage in negotiations with them, and that’s a good thing,” she explained.

In relation to the country’s economy, she reminded the audience that the new administration of President Samia Suluhu Hassan has prioritized certain sectors in terms of reforms to attract foreign investment. Among them is the energy sector, with a lot more push for energy projects that have struggled for years, like the liquefied natural gas (LNG) project, and the East Africa oil pipeline from Uganda.

“Another sector is mining, where there was a lot of controversy during the previous administration, and we see more and more talks between the current government and mining investors on some of the contentious laws that were passed under the previous administration. So we see that as a positive step that will lead to more productive discussions between investors and the government,” Mumanya commented.

“There’s also the financial services sector, which is especially important when it comes to credit availability. That’s one of the things that the government is pushing, particularly for small and medium-sized businesses to ensure that they have access to credit.”

She also provided her analysis on the much-debated issue of the sustainability of Tanzania’s sovereign debt. “I believe that the ability of the country to manage its external financial obligations is more a political issue than a genuine concern. From my assessment, the country’s debt is not growing in an unsustainable manner as of yet because most of the loans are still held on a concessional basis. The country has much more improved relations with multilateral financial institutions like the World Bank and the IMF and we don’t really foresee a crisis despite what you might see in the media.”

The conference also includes a roundtable of investors and advisors active in Tanzania, which included Heri Bomani, MD of Pangani Group, Uday Bhasin, Senior Partner of Tradeways Capital, Jayesh Shah, MD of Sumaria Group, and that was moderated by Alexander Storm Howe, MD of Africa Insight Advisors.

The purpose of the roundtable was to discuss the current investment framework in Tanzania, how it has changed from the previous administration, and what sectors offer the most interesting investment opportunities.

All the panelists acknowledge a deterioration of the investment and business framework during the late President Magufuli’s administration, but all of them confirmed a clear improvement and a renewed interest in the country under President Suluhu Hassan’s leadership.

According to Bomani, “The change is the mood in the country is clear. If you go back over the last few years, people were downcast, pessimistic, unsure, and uncertain about the way forward in Tanzania. And over the last 18 months, the mood has changed. People are a lot more optimistic and want to do deals. Whether that is translated into cash flow, I think the jury’s still out on that, but my sense is that cash flow remains challenging. If you look at suppliers and payments, and invoice turnaround time, the general sentiment I get from most people that I deal with is that it’s still a challenge to get paid. So I think the reality is that was the mood is improved, the cash flow hasn’t quite caught up. But I feel that there’s lots of evidence of this change coming to play quite quickly. As an example, if we look at commercial real estate, the number of multinational inquiries for office space has definitely ramped up over the last 12 months and we’re back to the activity levels that we saw pre-2015.”

According to Bhasin, “the key change that has happened in the last couple of years is that there has been an increasing willingness from policymakers and regulators to engage in dialogue with the private sector. Under the previous regime, there was a general fear, both from policymakers as well as from private sector participants, to have any kind of dialogue.”

According to Shah, “on the tax side, the Tanzania Revenue Authority (TRA) has improved in collecting with a smile. Under the previous regime, they were overzealous in terms of how they were collecting it. Now you can engage with TRA. VAT refunds were also an issue because they took too long. Now there is a budget provided, so we have actually seen them happening.”

As for the sectors of the economy that presented the most interesting investment opportunities, the ones mentioned by the panelists included mining, tourism, insurance and financial services, and FMCG.